Panasonic Seeks to Buy Control of Sanyo, Company Official Says

By Patrick Rial and Yoshinori Eki

Nov. 1 (Bloomberg) -- Panasonic Corp., the world's largest maker of consumer electronics, will seek to buy control of Sanyo Electric Co. from its biggest shareholders, a company official familiar with the negotiations said.

Panasonic will make a formal acquisition proposal soon to Goldman Sachs Group Inc., Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC Co., the official said, declining to be identified because the plan has not been publicly disclosed.

``It's not surprising to start to see some consolidation,'' said Ed Rogers, chief executive officer at Tokyo-based hedge-fund adviser Rogers Investment Advisors Y.K.

Goldman and the two Japanese banks hold preferred shares equivalent to 70 percent of Sanyo, the world's biggest maker of rechargeable batteries, received when they bailed out the company in February 2006. They agreed to hold the securities until March 2009, and need Sanyo's approval to sell before then.

The preferred shares would be worth more than $6 billion if converted to common stock at yesterday's closing price of 145 yen.

Panasonic will begin talks to buy a majority stake in Sanyo to expand into the solar power business, the Nikkei newspaper reported earlier today. Hiroyuki Okamoto, a spokesman for Sanyo, said he isn't aware of any such negotiations. Spokeswomen at Goldman and Sumitomo Mitsui declined to comment, and calls to Daiwa's Tokyo office went unanswered.

Sanyo, the world's leading maker of lithium ion batteries and the third-biggest solar panel producer in Japan, spent years losing money as competition prevented it from profiting on digital cameras and other consumer goods. The company refocused on rechargeable batteries and solar panels after the bailout, scaling back unprofitable businesses such as computer chips.

Solar Business

Panasonic is looking to expand into the fast-growing solar market, while batteries hold growth potential as carmakers move to develop electric vehicles, according to the report.

``There are certain industries that are more efficient than others and therefore the less efficient ones are going to be facing consolidation,'' Rogers said. ``A lot of guys have cash as Japan's had five of the healthiest years since World War II.''

U.S. solar power installations grew by 45 percent last year, according to the Solar Energy Industries Association. Sanyo plans to expand solar cell production capacity by 60 percent at a Japanese plant, Kyodo News said yesterday.

Sanyo, whose name means ``three oceans,'' also teamed up with Volkswagen AG, Europe's largest carmaker, to develop a lithium-ion battery system for use in hybrid cars.

Panasonic has fared relatively better than Japan's other electronics makers during the current global economic slump. Less reliance on overseas demand compared with rivals including Sony Corp., coupled with strong demand for appliances such as washing machines in China and other markets, helped support profitability. The company beat its second-quarter profit estimates on Oct. 28.

Combined projected sales of Panasonic and Sanyo for the year ending March 31 are about 11.2 trillion yen, according to company forecasts. That would surpass Hitachi Ltd. as the nation's biggest maker of electrical equipment, and catapult Panasonic to the No. 3 spot in revenue among listed Japanese companies.

To contact the reporter on this story: Patrick Rial in Tokyo at prial@bloomberg.net; Yoshinori Eki in Tokyo at yeki@bloomberg.net