Is Panasonic Interested in Sanyo?

Japan-based electronics maker Panasonic (PC) has plans to seek control of its smaller rival Sanyo Electric Co. (SANYY.PK), from its three biggest shareholders - Daiwa Securities SMBC, Sumitomo Mitsui Banking and Goldman Sachs (GS) which combined, hold roughly 430 million Sanyo preferred shares (70% of the company if shares were converted to common stock). The preferred shares would be worth more than $6.2 billion if converted to common stock at Friday’s closing price of 145 yen ($1.47).

The parties plan to start negotiations as early as this month and, according to Reuters there are indications that a basic agreement may be reached by the end of this year. However, all four firms have yet to enter into price negotiations since discussions are still at a preliminary stage. A spokesperson for Panasonic said nothing has been decided on the matter of Sanyo acquisition, and declined to comment on whether the company was in talks with the three Sanyo shareholders.  Goldman and Sumitomo Mitsui's spokespeople also declined to comment.

The acquisition of Sanyo Electric, which is the world’s leading maker of lithium ion batteries and the third-biggest solar panel producer in Japan, would put Panasonic in a leading position in the global rechargeable battery market where the company continues to face fierce competition from Sony Corp. (SNE) and South Korea’s Samsung. Two months ago, SANYO announced that it was planning to build a new plant in Japan as part of plans to boost its output of lithium-ion batteries by 30%. This would allow the company to reach a production capacity of lithium-ion batteries of 90 million cells a month by early 2009.

The acquisition, if an agreement is reached, would also allow Panasonic to gain a foothold into the promising solar market, as Sanyo is the world’s seventh-largest solar cell producer behind Germany’s Q-Cells (QCLSF.PK) and Japan’s Sharp Corp. (SHCAY.PK).  In recent years, Sanyo has increased its focus on rechargeable and solar power batteries. The company is also teaming up with German automaker Volkswagen AG (VLKAY.PK) to develop a lithium-ion battery for next-generation hybrid vehicles.

According to company forecasts, the combined projected sales of Panasonic and Sanyo for the year ending March 31 are about 11.22 trillion yen ($114 billion). The combined entity would be Japan’s largest electronics maker in revenue terms, surpassing Hitachi’s (HIT) projected 10.9 trillion yen, Japan’s top electronics firm in sales.

Disclosure: None