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Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (2153)	11/7/2008 1:28:15 PM
From: richardred	Respond to of 7254

Panasonic to swallow up Sanyo Friday November 7, 4:41 am ET By Kiyoshi Takenaka TOKYO (Reuters) - 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 brokerage analyst estimated could cost about $8.8 billion, would fortify Panasonic's competitiveness in rechargeable batteries and solar power equipment, both areas with strong growth potential. Panasonic would also become the world's second-largest conglomerate with a major electronics division behind General Electric, underscoring its strategy of boosting profits by forging into new markets and building scale. "As a result of this merger Panasonic will become a huge firm, the Toyota of the electrical appliance world, and that would be good," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities. The two Osaka-based companies will hold a joint news conference at 7 p.m. (1000 GMT) on Friday attended by Panasonic President Fumio Ohtsubo and Sanyo President Seiichiro Sano. The announcement was well-flagged by media. Sources told Reuters over the weekend that Sanyo and Panasonic, which is sitting on $10 billion in cash, had agreed in principle to a deal. Panasonic did not say how much it plans to offer for each Sanyo share but Credit Suisse analyst Koya Tabata earlier this week estimated Panasonic could offer up to 140 yen per Sanyo share, valuing Sanyo at up to 862 billion yen. ($8.8 billion). 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. Panasonic runs a car battery venture with Toyota Motor Corp , while Sanyo offers nickel metal hydride batteries to Panasonic runs a car battery venture with Toyota Motor Corp , while Sanyo offers nickel metal hydride batteries to Ford Motor Co and Honda Motor Co Ltd and develops lithium-ion batteries for cars with Volkswagen AG The deal will also enable Panasonic to enter the solar market. Sanyo is the world's seventh-largest solar cell maker behind such rivals as Germany's Q-Cells, Japan's Sharp Corp and Suntech Power Holdings Co Ltd of China. CHALLENGES AHEAD A deal would join two firms with close links in the past. Panasonic was founded 90 years ago by Konosuke Matsushita. Sanyo was formed soon after World War 2 when Toshio Iue, his brother-in-law and right-hand man in the early days of Matsushita, broke off on his own. But analysts point to a few potential risks to the acquisition. Sanyo remains saddled with a handful of poorly performing businesses such as white goods and semiconductors that will likely have to be restructured. Mizuho Asset Management fund manager Yoshihisa Okamoto sees the deal as positive for Panasonic, but said sluggish auto demand and falling oil prices could dim the prospects for solar panels and auto-use batteries. Toyota, the world's largest auto maker, shocked investors on Thursday with a warning that profits this year would hit a 13-year low. "Given the poor performance of car makers and tumbling crude oil prices, it could be a while before the development of ecologically friendly cars and growing use of solar panels will drive its earnings," Okamoto said. The acquisition also comes as a slowing global economy prompts consumers to tighten their purse strings. That will likely depress sales of flat TVs and other electronics products and could trigger a round of consolidation, analysts said. "It's been said that Japan has too many electronics makers, and if moves like this were to gain momentum, that would be positive for stock prices," said Soichiro Monji, chief strategist at Daiwa SB Investments. Reuters and other media reported on Saturday that Panasonic was in talks with Sanyo's top three shareholders Daiwa Securities SMBC, Sumitomo Mitsui Banking Co and Goldman Sachs to take control of Sanyo. 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. 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. Prior to the announcement, shares in Panasonic closed down 3.8 percent at 1,528 yen, while Sanyo fell 0.5 percent to 203 yen. The Nikkei average was down 3.6 percent. ($1=97.71 Yen) (Additional reporting by Sachi Izumi, Nathan Layne, Elaine Lies, Aiko Hayashi; Editing by Chris Gallagher) biz.yahoo.com