Panasonic Offers $9.4 Billion to Buy Out Two Units
By Mariko Yasu - Jul 29, 2010
Panasonic Corp., the world’s largest maker of rechargeable batteries, offered to buy out Sanyo Electric Co. and Panasonic Electric Works Co. for 818.4 billion yen ($9.4 billion) to help expand its renewable energy business.
Panasonic, which may sell as much as 500 billion yen of new stock to fund the deal, offered 138 yen for each Sanyo share it doesn’t own and 1,110 yen for every Electric Works stock, the Osaka-based company said in statement today. That’s 17 percent and 14 percent more than their July 28 closing prices. The units surged above the offer in Tokyo trading today.
The purchases would build on President Fumio Ohtsubo’s plans to expand business such as solar panels amid mounting competition from Samsung Electronics Co. and Sony Corp. in televisions. Panasonic fell the most in more than a year in Tokyo trading on concern the cost of the purchase may strain a company reeling from two years of losses.
“Panasonic faces fierce competition from Samsung and Sony in consumer electronics,” Yuji Fujimori, a Tokyo-based analyst at Barclays Capital. “Its rivals are not as competitive in the energy-related products and household electrics systems that Panasonic aims to strengthen.”
Sanyo jumped 26 percent to close at 149 yen on the Tokyo Stock Exchange and Panasonic Electric Works climbed 15 percent to 1,124 yen after the Nikkei newspaper reported the buyout plans earlier. Panasonic, the world’s largest maker of plasma TVs, declined 7.7 percent to close at 1,077 yen.
The maker of Viera TVs expects the buyouts to add 60 billion yen to Panasonic’s annual operating profit, Ohtsubo said at a briefing in Osaka today.
Largest Acquisition
The combined acquisitions would be the largest in Japan this year, according to Bloomberg data. Panasonic owned 50 percent of Sanyo and 51 percent of Electric Works as of today, according to the statement.
The offer, which will start on Aug. 23 and complete on Oct. 6, values Sanyo at 51 times estimated earnings for the year ending March 2011 and almost 36 times estimated profit at Electric Works, according to analyst estimates compiled by Bloomberg. By comparison, companies on the Nikkei 225 Stock Average trade at a multiple of 18, according to Bloomberg data.
Some shareholders said the offer is too low.
“There is no way we would accept this offer,” Huy Hoang, a fund manager at HDH Capital Management Pte, which owns 1.4 million shares of Sanyo, wrote in an e-mail. “Panasonic is trying to time the market and take advantage of minority shareholders.”
Share Swap
Shareholders of Sanyo and Electric Works have the option of accepting the parent’s offer or taking Panasonic shares, according to the statement. The company plans to complete the purchase by around April next year, it said.
Under Japanese law, a company that acquires at least two- thirds of a target through a tender offer can force minority shareholders to give up their holdings through a share swap, said Masaji Hashimoto, a lawyer at Atsumi & Partners in Tokyo.
The maker of Lumix cameras today raised its full-year net income forecast to 85 billion yen from a previous projection of 50 billion yen. The company also increased its estimate for operating profit by 24 percent to 310 billion yen.
In 2008, Panasonic agreed to buy a controlling stake in Sanyo from Goldman Sachs Group Inc., Daiwa Securities Group Inc. and Sumitomo Mitsui Financial Group Inc. Panasonic completed its offer for Sanyo in December last year after clearance from antitrust regulators in the U.S., Europe, Japan and China.
Sanyo was the largest maker of rechargeable batteries in the year ended March 2009, followed by Sony, South Korea’s Samsung SDI Co., Panasonic, China’s BYD Co. and LG Chem Ltd., according to estimates at Japan Economic Center Co. Panasonic and Sanyo accounted for a combined 43 percent of the market, according the Tokyo-based researcher.
Uniting Panasonic
Panasonic said it plans to combine the three companies’ brands, though Sanyo’s name may continue to be used in some regions. The three companies will unite and slim down their operations to start a new business structure in January 2012, Panasonic said.
Panasonic Electric Works, the unit that makes lighting systems, electrical wiring fittings such as wall sockets and electronic materials used in chips, became an affiliate in 1935 and split as a separate entity in 1945.
Panasonic, Japan’s biggest maker of home appliances, paid 146 billion yen for a majority stake in the lighting unit in a tender offer in 2003.
Nomura Holdings Inc. advised Panasonic on the latest deal, while Abeam M&A Consulting advised Sanyo and Daiwa Securities Group Inc. advised Electric Works.
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