Panasonic to buy Sanyo, more deals may follow

Panasonic Corp said it would acquire smaller rival Sanyo Electric Co, creating Japan's top electronics maker and foreshadowing further
consolidation in an industry hit by slowing consumer demand.

The acquisition, which one analyst estimated could cost about $8.8 billion, would fortify Panasonic's competitiveness in rechargeable batteries and solar power equipment as demand grows for greener energy sources.

Panasonic would at the same time become the world's second-largest conglomerate with a major electronics division, behind General Electric and surpassing Hitachi Ltd as the biggest electronics maker in Japan.

But the deal carries risks and Panasonic has not said what it might pay for Sanyo, or what it plans to do with the latter's loss-making businesses such as home appliances and microchips.

"Strategically (the deal) makes sense, though it doesn't necessarily make sense for Panasonic to take on every single bit of Sanyo Electric," said Hannah Cunliffe, fund manager at Germany's Union Investment, which holds Panasonic shares. "There has to be some relatively aggressive restructuring."

The announcement was well flagged and sources told Reuters last weekend that Sanyo and Panasonic, which sits on $10 billion in cash, had agreed in principle to a deal.

Panasonic, the world's top plasma TV maker formerly known as Matsushita Electric, wants Sanyo because of its leading position in rechargeable batteries, which are widely used in mobile phones, PCs, music players and increasingly to power cars.

Sanyo supplies nickel metal hydride batteries to Ford Motor Co and Honda Motor Co Ltd and develops lithium-ion batteries for cars with Volkswagen AG, while Panasonic runs a car battery venture with Toyota Motor Corp.

The deal would also enable Panasonic to enter the solar market. Sanyo is the world's seventh-largest solar cell maker, trailing Germany's Q-Cells, Japan's Sharp Corp and Suntech Power Holdings Co Ltd of China.

"Adverse business conditions are making it difficult for us to achieve the kind of growth we have been striving for," Panasonic President Fumio Ohtsubo told a news conference. "We need a new growth engine within our group."

Source: EconomicTimes