Panasonic and Sanyo officially acknowledged that the companies have started discussions "for a capital and business alliance between the two corporations," with the aim of making Sanyo a Panasonic subsidiary.
The boards of each company met separately on the proposal Nov. 7.
According to a statement issued by Panasonic, the companies will start discussions "with the aim of maximizing both companies' corporate values by pursuing synergies between both companies and further strengthening initiatives to achieve potential revenue and profit growth through this alliance."
Sanyo has significant investments in solar energy and battery technologies, which can complement similar initiatives Panasonic has in development.
The deal was rumored by the Japanese press for almost a week prior to the official announcement. The agreement seemed surprising to some industry observers since during the past year Panasonic officially changed its name from Matsushita Electric to present one brand name world wide as of Oct. 1 and all but divested itself of its Victor Company of Japan (JVC) investment.
Panasonic CEO Fumio Ohtsubo was quoted by The Wall Street Journal on Nov. 7 during a joint press conference, here, announcing the deal that "The economic outlook is very unforgiving, and it's becoming difficult to grow profits. We desperately need another engine of growth."
In the same story Seiichiro Sano, CEO of Sanyo, indicated how fast this idea came about. "After the financial crisis that hit in September, I felt the need to come up with specific solutions, and quickly." (See p. 61 for Sanyo's first-half financial report.)
"We are committed to becoming an indispensable element in the lives of people all over the world," Panasonic said in its statement. "Gathering together the accumulated technologies and manufacturing knowledge of both companies, we believe that we will evolve to a corporate group which will be highly admired globally by enhancing the quality of life for the people worldwide and coexisting in harmony with the global environment."
The companies said they will seek to "make Sanyo a subsidiary of Panasonic," with Panasonic looking to "share both companies' management know-how and business resources while collaborating with each other, thereby creating a global competitive foundation which will maximize corporate values of both Panasonic and Sanyo and bring benefit for both companies' shareholders and all other stakeholders, including customers and employees."
Both companies will collaborate on the development of the rechargeable-battery market as well as its provision of global sales networks in order to expand Sanyo's solar and energy businesses, according to the statement.
"We can aim to reduce the production and development cost through technical collaboration," the companies said.
This will result from more efficient materials procurements, and by leveraging Panasonic's experience in cost reduction, which can be applied across Sanyo's operations, the companies said.
"Panasonic would also like to apply Sanyo's remarkable mass production techniques to Panasonic's operation. Both companies will further the best operations of both companies in other areas, without regard to the origin company of the method," the statement said.
The companies said they will immediately set up a project team "to start intensive discussions." They said they expect to report on the progress of the discussions "around the end of December."
"If we reach an agreement earlier, we will disclose the progress promptly after the agreement is made," the companies said. — Additional reporting by Steve Smith