Panasonic Offers to Acquire Sanyo for $9 Billion

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Dec. 19 (Bloomberg) -- Panasonic Corp. offered to pay as much as 806.7 billion yen ($9 billion) to buy Sanyo Electric Co., gaining the lead in the global rechargeable battery market in Japan’s biggest consumer-electronics acquisition.

The offer of 131 yen a share, less than the market price, is being considered “positively” by Goldman Sachs Group Inc. and two Japanese banks holding a combined 70.5 percent stake in Sanyo, Panasonic, the world’s biggest consumer-electronics maker, said in a statement today. Goldman Sachs, Daiwa Securities Group Inc. and Sumitomo Mitsui Financial Group Inc. bailed out Sanyo in 2006 and would gain an 87 percent return on their investment.

The acquisition would almost quadruple Panasonic’s share of the rechargeable-battery market and give it access to Osaka-based Sanyo’s solar-cell technology. Panasonic said it plans to speed up development of next-generation solar cells and use its sales network to boost revenue from the devices.

“A merger would supply much-needed funds for Sanyo to maintain its position in the solar-battery market,” said Yuuki Sakurai, general manager of investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which manages $54 billion in assets. “It’s difficult to imagine Sanyo succeeding by going it alone, and in that sense the offer is progress.” Sakurai declined to comment on Fukoku Mutual’s holdings.

Bond Issue

Panasonic may sell as much as 400 billion yen of bonds to fund the purchase and will consider investing about 100 billion yen to integrate both companies’ operations, it said without elaborating.

Sanyo shares lost 3.6 percent to close at 136 yen on the Tokyo Stock Exchange, taking their loss for the year to 12 percent. Panasonic gained 2.9 percent to 1,051 yen. Japanese share markets closed before the announcement.

Panasonic plans to maintain Sanyo’s stock market listing after the purchase is completed, the Osaka-based company said in the statement. It gave no timetable for buying shares in a tender offer, citing regulatory procedures, and said it will announce progress in February.

Goldman Sachs paved the way for the deal to proceed by agreeing to sell its Sanyo stake Panasonic, ending weeks of resistance after accepting a price increase of less than 1 percent, two people familiar with the matter said yesterday.

Panasonic’s market share in the rechargeable battery market would jump to 38 percent from 10 percent this year if the deal is completed, according to a Goldman Sachs analyst report today.

Family Ties

The purchase revives links between the two companies that date to Sanyo’s creation. Sanyo’s founder, the late Toshio Iue, was a brother-in-law of Konosuke Matsushita, who established Panasonic in 1918. Iue quit his job at Matsushita Electric Industrial Co., the former name of Panasonic, in 1946 and set up Sanyo the following year.

“The historical roots of the two companies played a big role in Panasonic’s offer, more so than the deal’s logistics,” Fukoku’s Sakurai said.

The Panasonic acquisition would dwarf the $753 million merger in October of Kenwood Corp. and Victor Co. of Japan Ltd., according to data compiled by Bloomberg.

Panasonic gained Sanyo’s endorsement on Nov. 7 to take over the company. Goldman Sachs, Daiwa and Sumitomo, which bailed out Sanyo for 300 billion yen, agreed to hold the securities until March 2009, and needed Sanyo’s approval to sell the shares before that time.

Goldman Sachs Resisted

After Panasonic started talks with the three banks over terms including the purchase price, Goldman Sachs rejected Panasonic’s offer twice, because of disagreement over terms.

Panasonic on Nov. 27 slashed its full-year profit forecast by 90 percent as the global recession damped demand and product prices fell, projecting net income of 30 billion yen in the year ending March 31. Prices for flat-panel TVs will probably drop 30 percent this fiscal year, because of deteriorating demand for consumer electronics, Director Makoto Uenoyama said at the time.

Sanyo, focusing on solar and rechargeable battery production, targets an operating profit, or sales minus the cost of goods sold and administrative expenses, of as much as 100 billion yen in the year ending March, 2011, up form 76.1 billion yen.

To contact the reporter on this story: Hiroshi Suzuki in Tokyo at Hsuzuki5@bloomberg.net.

Last Updated: December 19, 2008 04:02 EST