Report: Panasonic To Acquire Control Of Sanyo

By Greg Tarr -- TWICE, 11/3/2008

Tokyo — Panasonic has agreed “in principal” to deals to acquire controlling interest in its struggling competitor Sanyo Electric, according to a report Sunday by The Nikkei news service, but Panasonic and Sanyo officials denied Monday any such deal had been struck.

According to Japanese reports over the weekend, Panasonic reportedly intends to purchase a majority stake in Sanyo and convert it into a subsidiary by next April.

On Monday, Panasonic’s corporate offices issued a statement on the report saying: “this announcement was not made by Panasonic, and the company has not decided anything in regards to the purchase.”

Sanyo issued a statement Monday saying: "certain press was released in regards to Sanyo's preferred shares, however the official decision has not been made at this time. "

The report said the two firms would have board meetings as early as Friday and Panasonic president Fumio Ohtsubo and Sanyo president Seiichiro Sano could hold a press conference to announce the merger plans the same day.

According to the report, Panasonic would keep the Sanyo brand after the acquisition and “will try to retain the smaller rival's employees.”

If so, the arrangement would seem to run counter to Panasonic’s recent unified brand strategy, which dropped the company’s Matsushita name and its National Japanese brand. The company also recently divested much of its holdings in JVC.

Observers told Nikkei that Panasonic’s interest in Sanyo could be its strong positions in solar cells and rechargeable batteries, where Panasonic could generate growth by bolstering its existing operations. According to Nikkei, Panasonic will begin talks this week with Sanyo’s three largest shareholders — Sumitomo Mitsui Banking, Daiwa Securities SMBC and Goldman Sachs.

Nikkei said the three shareholders have about 428 million preferred shares, or about 70 percent of the company; if converted to common stock, that would amount to roughly $6.3 billion on the latest stock price.

Nikkei said Panasonic plans to convert the preferred shares into common stock and that “SMBC may retain a portion of its shares in Sanyo in its role as Panasonic's main bank.” Panasonic could also buy Sanyo shares from holders of common stock, the report said.

Once announced, the deal would require the approval of shareholders, which Nikkei said is no sure thing. Major shareholders reportedly have disagreed over how to proceed with the sale of preferred shares.