Panasonic shares jump on talks to buy Sanyo
Shares in Panasonic Corp (6752.T: Quote, Profile, Research, Stock Buzz) jumped nearly 7 percent on Tuesday, after sources said it planned to buy smaller rival Sanyo Electric Co Ltd (6764.T: Quote, Profile, Research, Stock Buzz) to create Japan’s largest electronics maker.
Shares of Sanyo surged 34.5 percent to 195 yen, valuing the company at $3.7 billion.
Buying Sanyo would strengthen Panasonic’s battery business and give it a foothold in the fast-growing solar equipment market. Sanyo’s is the world’s top supplier of rechargeable batteries and ranks seventh in solar cells.
“Sanyo is strong where Panasonic is not such as in lithium-ion batteries and solar cells,” said Fujio Ando, senior managing director at Chibagin Asset Management.
“This is not an acquisition of the weak. The two can take advantage of each other’s strengths.”
Reuters and other media reported on Saturday that Panasonic was in talks with Sanyo’s top three shareholders — Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz), Daiwa Securities SMBC and Sumitomo Mitsui Banking Co — to buy their shares and take control of Sanyo.
Sources told Reuters on Sunday that Panasonic President Fumio Ohtsubo and Sanyo President Seiichiro Sano had met and agreed in principle to Sanyo becoming a Panasonic subsidiary, but that no price had been set.
Panasonic and Sanyo have both said nothing has been decided and declined to confirm if they were in talks.
To win Sanyo, Panasonic will have to buy out the three shareholders, which between them hold nearly 430 million preferred shares in Sanyo bought in a 2006 bailout of the company after it fell deep into the red due to slumping sales and earthquake damage to a microchip plant cash till payday advance.
Each of the preferred shares can be exchanged for 10 common shares when a restriction is lifted in March, giving the three banks a combined 70 percent stake in the firm. The preferred shares would be worth 621 billion yen if they were converted to common stock at Friday’s closing price of 145 yen.
But Panasonic may be able to buy them out at a much lower price given the stock market slump and costs to restructure Sanyo following the purchase, said a brokerage analyst who asked not to be named.
Shares of Panasonic opened up more than 9 percent before paring gains to close 6.8 percent higher at 1,614 yen, giving it a market value of about $40 billion.
Often the shares of a buyer in a takeover fall due to worries over the financial risk of a deal but analysts said the deal was positive for Panasonic, because of Sanyo’s battery and solar technologies.
“I think it is very positive for Panasonic. They will probably buy this company at a bargain price and they will have an entry into solar and become the leader of lithium-ion batteries. It’s exactly what they needed,” the analyst said.
Panasonic should not have any problems financing an acquisition given it is sitting on $10 billion of cash.
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