Clearing the way for a deal worth at least $6.5 billion, Goldman Sachs has agreed to a slightly sweetened offer from Panasonic to buy its stake in Sanyo Electric, Reuters reported, citing three financial sources close to the situation.
The combination of Panasonic, the world’s biggest plasma TV maker, and Sanyo, the top producer of rechargeable batteries, would create Japan’s No. 2 electronics manufacturer after Hitachi with $120 billion in annual sales.
Sanyo shares slid 3.5 percent to 138 yen by midday on Thursday on news that a deal had been reached below the company’s current share price.
The move by Goldman, which had rejected Panasonic’s earlier lower offers, came after the Wall Street firm reported its first quarterly loss since going public and Panasonic and rival consumer electronics makers were hit by a sales slump.
Panasonic and Sanyo plan to hold a joint news conference on Friday to give details of a planned tender offer, in which Panasonic will offer 131 yen per Sanyo share, the sources told Reuters, 1 yen more than it had earlier offered this month.
Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, told Reuters that Panasonic President Fumio Ohtsubo would have a tough time creating synergy effects even though the deal now looks set to go through.
“When things are good and top lines are growing, it is easy for Japanese companies to carry out restructuring. They are not very good at streamlining in an environment like this since no one would rehire the employees they let go,” he said.
“His pain from overseeing the birth of a successful merger has just begun.”
Hit by a global economic downturn and a surging yen, Japanese exporters are scrambling to cut costs by lowering production and delaying construction of new plants.
While Sanyo leads the market for rechargeable batteries, which are widely used in cellphones, PCs and increasingly in automobiles, struggling businesses such as microchips are dragging down its overall performance.
Shares of Panasonic were up 0.3 percent at 1,029 yen, outperforming the Tokyo stock market’s electrical machinery index, which was virtually unchanged.
Panasonic, which is sitting on $11 billion in cash, first offered 120 yen per share to Sanyo’s three top shareholders — Sumitomo Mitsui Banking, Daiwa Securities SMBC and Goldman — and later raised its offer by 10 yen.
Daiwa Securities SMBC and Sumitomo Mitsui Banking were considering the offer positively, Reuters said, citing sources. But Goldman earlier this month rejected the sweetened offer of 130 yen.
The three shareholders hold nearly 430 million preferred shares, each of which can be exchanged for 10 common shares when a restriction is lifted in March.
If converted they would hold a combined 70 percent stake, worth some 565 billion yen, based on the offer price of 131 yen, according to Reuters calculations.
Goldman appears to have taken its chance to sell its stake, despite the price being far below what it had been seeking, due to the increasingly bleak outlook for Japanese consumer electronics makers.
Late last month, Panasonic, formerly known as Matsushita Electric, cut its annual net profit forecast by 90 percent and announced plans to restructure as the global financial crisis dampens sales of TVs and other electronics.
Some analysts have also said the market price of Sanyo shares may not have fully factored in a dilution in per-share value, which comes with the conversion of preferred shares into common shares.
Daiwa Securities SMBC is a joint venture between Daiwa Securities Group and Sumitomo Mitsui Financial Group, while Sumitomo Mitsui Banking Corp. is Sanyo’s main bank and part of S.M.F.G.
