Business - Panasonic to acquire Sanyo for up to $9 billion

Tokyo: Japan’s Panasonic Corp. said Friday it had cleared the way to acquire struggling Sanyo Electric Co. for up to nine billion dollars, forming an industry heavyweight amid the global downturn.
The deal is the first major realignment of Japan’s electronics industry since the start of the economic crisis, which has led companies to suspend production as consumer demand dries up.
Panasonic will buy Sanyo shares from US investment firm Goldman Sachs and Japan’s Daiwa Securities and Sumitomo Mitsui, giving a badly needed cash injection into the financial sector as it reels from the credit crunch.
“We, the electronics industry, are faced with the need to restructure amid the global recession as well as a downward shift in prices and the growth of emerging markets,” Panasonic president Fumio Ohtsubo told a news conference.
“Under these circumstances, it is all the more important to strengthen our management practices to grow further,” he said.
Sanyo, which started off making bicycle lamps after World War II, has cut thousands of jobs as it attempts to return to profit.
Recently it has tried to focus on environmental technologies including solar energy and rechargeable batteries - areas coveted by Panasonic.
Panasonic said it had reached a deal on a tender offer aiming to secure a 70.5 % stake in Sanyo at 131 yen a share, valuing the deal at a maximum of 800 billion yen (around $9 billion).
Ohtsubo said that the companies sought to increase operating profit by 80 billion yen in the 2012 financial year through the tie-up.
“What we want to add as our new core business is the energy business,” including batteries which are key to eco-friendly hybrid cars, Ohtsubo said.
“In order to accelerate the synergy effect of our two companies, we are ready to invest 100 billion yen,” mostly in the battery business but also in other fields, he said.
“We believe that we will evolve into a corporate group which will be highly admired globally, coexisting in harmony with the global environment,” he said.
Sanyo, which like Panasonic is based in the western Japanese metropolis of Osaka, will remain listed.
Sanyo has had a troubled few years. It was forced to raise cash by issuing new shares, effectively handing over control to Goldman Sachs and other financial firms.
Toshimasa Iue, a member of the founding family, stepped down last year after he clashed with the big investors over how far to restructure the company.
Panasonic, which is already Japan’s biggest seller of consumer electronics, has been seeking to raise its global profile against rivals -- notably Sony Corp. -- that enjoy solid name recognition.
Kazumasa Kubota, an analyst at Okasan Securities, said that despite the high cost, “in the longer term the acquisition is absolutely an advantage for Panasonic.”
“Sanyo reportedly holds hundreds of patents in the field of battery technology and has strengths in solar power,” he said.
Kubota credited Panasonic with negotiating shrewdly, knowing that Goldman Sachs needed cash.
Just two weeks earlier, Goldman Sachs had rejected an offer from Panasonic that was reported to be 130 yen per share - only one yen difference from the 131 yen in the agreement.
But on Tuesday, Goldman Sachs reported a 2.12 billion dollar net loss in the fiscal fourth quarter to November, the first time it has gone into the red since going public in 1999.