Panasonic to buy majority of Sanyo for $6.38 billion

December 23, 2008

Source: Panasonic

Panasonic Corp. has reached an agreement to purchase stakes in Sanyo Electric Co. held by Goldman Sachs, Daiwa Securities SMBC Co., and Sumitomo Mitsui Banking Corp., the three financial firms with major holdings in the electronics group, according to reports Thursday .

Panasonic will pay 131 yen ($1.49) per share for the roughly 70% stake held by three financial firms, for a total of 560 billion yen, according to reports by the Nikkei newspaper and Dow Jones Newswires, neither of which identified its sources.

The deal values Sanyo, a home appliance and consumer electronics maker, at about 800 billion yen. Panasonic, a world giant in consumer appliances and digital electronics, will make a tender offer for Sanyo shares held by individual investors in February, and will seek to transform it into a subsidiary by the end of March, according to reports.

Goldman Sachs agreed to sell its stake after senior members of the firm met with their Panasonic counterparts in Tokyo Wednesday, according to reports. Daiwa Securities SMBC Co. and Sumitomo Mitsui Banking Corp. had appeared willing to accept the earlier offer for its stakes.

The deal would mark the biggest acquisition of its kind between two Japanese electronics groups and could herald the emergence of a global powerhouse in goods ranging from flat-screen televisions to notebook computers and environmental technologies.

Panasonic, formerly know as Matsushita Electric Works, has forecast fiscal 2008 sales of 8.5 trillion yen while Sanyo's are projected at 2.02 trillion yen. Combined sales from the merger would rival those of electronics and electrical machinery maker Hitachi Ltd. (HIT:Hitachi, Ltd. , which ranks as Japan's largest in the sector. Hitachi has forecast sales this fiscal year of 10.9 trillion yen.

Panasonic is believed to be interested in Sanyo's rechargeable battery and solar panel business as potential growth markets.

In 2006, Goldman and the two other Japanese financial institutions purchased about 300 billion yen of preferred shares in the financial-ailing Sanyo which could be converted into common stock at 70 yen per share.

Goldman considered its options as a minority shareholder, but decided to pull out after concluding share prices could tumble in the current volatile market and that it could not take the risk of building additional stakes in Sanyo through market purchases or direct purchases from other shareholders, Dow Jones Newswires reported. The three firms had an option to buy out the other shareholders, an action that could have been used to block an acquisition.

Goldman's position was also in question after it reported earlier in the week its first quarterly loss since going public in 1999.

Panasonic's board will hold an official meeting on the acquisition Friday, but the proceeding appears to be a formality.

In the lead up to the agreement, Panasonic had offer offered 120 yen per share in November, which it later lifted to 130 yen in early December. Goldman had called earlier called the 130-yen-per share bid too low.

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