Deal is on for Panasonic to acquire Sanyo

As the world finally starts taking seriously the move to solar power, Sanyo has been implementing a plan to emerge victorious as the leader in that field. But with the global economic crisis upon us, it may not be able to do that alone.

The Chinese news agency Xinhua is confirming, and Reuters is also reporting this morning, that Panasonic and Sanyo Electric have struck an agreement which will enable Panasonic to acquire a 70% stake in Sanyo from three financial institutions which currently co-own the company, including Goldman Sachs.

The move, which would leap-frog Panasonic over Hitachi to become the largest electronics equipment producer in Japan, could vault the former Matsushita Electric to not only the much-envied position of world's dominant producer of lithium-ion batteries but also a prominent stake in solar-powered batteries -- an extremely high-growth market, according to Japanese financial analysts, and one in which Panasonic currently has no position at all.

In Japan, the measure of a company's wealth in solar power is measured not in yen but in megawatts (MW). Last year, Sanyo produced a steady stream of 260 MW of power, enough to give it a 4.4% market share for the year. Right now, the leader in that market is Kyocera, though no single solar power player currently has a dominant stake. Just last August, Sanyo made an investment of about 70 billion yen (about $712 million at current exchange rates) in redoubling its solar power efforts.

At that time, the company predicted it could produce as much as 4 GW (with a "G") per year by 2020, giving it a respectable 10% market share given the fact that its competitors would grow as well.

How healthy is Sanyo right now? Actually, it's in pretty solid shape, even when you take into account that 70% of it is owned by banks. In an effort to slim down, it sold its mobile phone unit to Kyocera in September 2007. The completion of that sale gave Sanyo some much needed cash, when it realized in the last quarter. According to a Bloomberg report, net income doubled for that quarter as a result, on sales that continued to rise mildly even as the global economic crisis hit Japan.

But with about 620 billion yen ($6.3 billion) of Sanyo being owned by banks, the electric producer could be in a much better position to execute its growth plans as a division of a solid company than as the asset of a fledgling network of tempest-tossed financial firms. And it's that fact that probably drove the two rivals to the bargaining table.

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