Panasonic looking to acquire Sanyo to create Japan's largest electronics company

Panasonic Corp. and Sanyo Electric Co. formally announced merger talks last night, potentially opening the door to the creation of Japan's biggest consumer-electronics company.

The merged entity would also be the second-largest conglomerate after GE to have an electrical and electronics business.

In a joint statement, the companies said their respective boards had agreed to establish a working group to discuss a capital and business alliance under which Sanyo would become a subsidiary of Panasonic. A successful deal would be worth around $8 billion and result in Japan's biggest electronics maker and give Panasonic a bigger share of the fast-growing market for rechargeable and solar batteries.

"We aim to share both companies' management know-how and business resources while collaborating with each other, thereby creating a global competitive foundation which will maximize corporate values of both Panasonic and Sanyo and bring benefit for both companies' shareholders and all other stakeholders, including customers and employees," the statement said.

This effectively gives Panasonic, formerly known as Matsushita Electric Co., the green light to begin talks with Sanyo's three major shareholders: Sumitomo Mitsui Banking Corp., Daiwa Securities SMBC Co. and Goldman Sachs Group.

Sanyo has a market capitalisation about $3.8 billion. The three major investors in Sanyo purchased about 300 billion yen ($3.08 billion) of preferred shares in 2006, equivalent to about 70 per cent voting rights if converted into common stock.