Panasonic Starts Tender for Sanyo

Panasonic Corp. (PC - Analyst Report) provided another update on the acquisition of SANYO Electric Co Ltd. (SANYY) at its Board Meeting held on Nov 4, 2009. The company announced the start of its tender offer to acquire 3.1 billion shares of SANYO (or more than 50% of the company’s total shares) for approximately $4.4 billion (403 billion yen). 

Earlier, Panasonic had planned to take over all of Sanyo's shares. Panasonic had entered into a capital and business alliance agreement with SANYO in Dec 2008. The latter is a leading company in the rechargeable battery business focused on lithium-ion rechargeable batteries. Panasonic is one of the leading manufacturers of electronic and electrical products, systems and components. 

The tender offer is planned for Nov 5 through Dec 7 at a price of $1.4 or 131 yen per share. Goldman Sachs, Daiwa Securities SMBC and Sumitomo Mitsui Banking Corp. (Sanyo's three major shareholders) holding approximately 70% of total shares have agreed to sell at least a combined 3.07 billion shares to Panasonic. 

The Panasonic deal with SANYO is pending regulatory approval but the company said earlier that most of the regulatory hurdles have been taken care of in some countries. Panasonic has so far received the approval of seven regulatory bodies for its proposed acquisition of Sanyo Electric but is still waiting for regulatory approval from the United States Federal Trade Commission, the Ministry of Commerce and the European Commission. 

The regulatory bodies were concerned on the growing combined market share of Panasonic and SANYO (approximately 90%) in nickel-metal hydride batteries and cylindrical primary lithium batteries, which will pose a threat to other manufacturers. 

To deal with this, Panasonic said that it will transfer to FDK Corporation all the shares of SANYO Energy Twicell Co. Ltd., which conducts the business of rechargeable portable nickel metal-hydride batteries. The share transfer is expected to take place on Dec 21, 2009. 

The energy business of SANYO will be added as Energy Solutions to Panasonic’s business, which will further expand its HIT (crystalline silicon) solar photovoltaic cells and modules (batteries) business and accelerate the development and commercialization of next-generation solar cells. By taking over SANYO, Panasonic plans to double production capacity of lithium ion batteries to around 1 million units a year by the middle of 2010. 

Panasonic expects the alliance to result in a net profit growth of 80 billion yen in fiscal 2013. Panasonic and SANYO will also set up a ‘Collaboration Committee’, in which Panasonic will invest around 100 billion yen in order to achieve the synergy of both companies.
 

Management said that Sanyo is expected to become Panasonic's subsidiary by mid-December, bringing greater expertise in two areas – batteries and solar panels. 

This acquisition will enable Panasonic to more aggressively compete with market leaders such as Sony (SNE - Analyst Report) and Hitachi (HIT - Analyst Report) amid growing demand for the rechargeable power source commonly used in mobile phones, laptop PCs and digital cameras. Moreover, it will help Panasonic become Japan’s largest electronics maker.