Panasonic to turn Sanyo into subsidiary through tender offer+

OSAKA, Dec. 19 Kyodo -
Panasonic Corp. said Friday it will launch a tender offer to turn smaller rival
Sanyo Electric Co. into a subsidiary as it eyes expanding its green businesses
to combat falling profits amid the global economic downturn.
Panasonic has finalized a deal to acquire a stake of around 70.5 percent in
Sanyo from three major shareholders for 131 yen per share following tough
negotiations over the below-market purchase price.
The agreement, reached a month after the two companies launched talks on a
capital and business tie-up, will create Japan's largest electrical machinery
maker, matching Hitachi Ltd. in terms of sales.
The acquisition of Sanyo, the world's largest supplier of lithium ion
batteries, will help Panasonic to beef up its rechargeable battery operations
and boost its presence in the solar-cell business.
Panasonic President Fumio Otsubo said the company aims to boost combined
operating profit for fiscal 2012 by 80 billion yen through cooperation with
Sanyo, with half of that growth coming from the establishment of new energy
businesses where Sanyo has a global competitive edge.
It also plans to invest around 100 billion yen to achieve synergy effects from
the merger.
''The historical recession that has sharply accelerated during the latter half
of this year has placed the electronics industry in a grave situation,
challenging its survival,'' Otsubo said at a press conference in Osaka.
''But we feel it is necessary to take bold actions to promote growth while
strengthening our management culture, particularly at a time when we are facing
dramatic changes,'' he said.
Panasonic is aiming to turn Sanyo into a subsidiary through a tender offer to
three key shareholders -- Goldman Sachs Group Inc., Daiwa Securities SMBC Co.
and Sumitomo Mitsui Banking Corp.
The three shareholders are expected to convert their preferred Sanyo shares
into common stock before selling them to Panasonic. Panasonic will issue about
400 billion yen in straight bonds partly to finance the tender offer, which
will cost Panasonic over 560 billion yen to acquire all of the Sanyo shares
held by the three.
Goldman had earlier flatly rejected Panasonic's offer to purchase Sanyo shares
for 130 yen per share, complaining that the price was far lower than the market
price, although the Japanese consumer electronics maker had raised the price by
about 10 yen from its initial offer. Sanyo shares closed at 136 yen on the
Tokyo Stock Exchange on Friday, down 3.5 percent from a day earlier.
But analysts said the giant U.S. investment bank may have decided to accept
Panasonic's final offer of a marginal 1-yen rise to 131 yen, judging that it
was unlikely to secure a higher price amid the bleak business conditions
plaguing Japan's electronics industry and on the heels of heavy losses at home
from the financial meltdown.
Last month, Panasonic slashed its group net profit estimate for fiscal 2008
through next March by over 90 percent from its original target to 30 billion
yen, following Sony Corp. and Toshiba Corp. which also cut their earnings
forecasts.
Kazumasa Kubota, analyst at Okasan Securities Co., said, ''It's not a cheap
buy'' for Panasonic at a time when the industry is facing a downturn but the
merger will have long-term benefits for Panasonic in view of Sanyo's
competitive edge in new energy businesses.
''In the short term, the integration costs will precede (the merits),'' Kubota
said.
''But there will be long-term merits since Panasonic will be adding a growth
business'' in solar energy and lithium ion batteries, he said.
Meanwhile, Sanyo President Seiichiro Sano said the deal with Panasonic ''opens
a very big path to further develop our business...amid this extremely uncertain
and severe management environment.''
''We gained a significant advantage to survive the (global) competition,'' Sano
said.
Panasonic said it will continue to list Sanyo's shares and that it plans to
report on the progress of the tender offer at the end of February. Its shares
closed at 1,051 yen, or up nearly 3 percent, from a day earlier.
Panasonic and Sanyo are expecting combined group sales of about 10.5 trillion
yen for fiscal 2008, nearly equivalent to the 10.9 trillion yen that Japan's
industry leader Hitachi Ltd. is anticipating for the same business year.
==Kyodo
2008-12-19 23:57:39