TOKYO, Nov. 7 (Xinhua) -- Panasonic Corp. and Sanyo Electric Co. formally announced on Friday that they will begin negotiations to form a capital and business alliance in the aim of turning Sanyo Electric into a Panasonic subsidiary.
Panasonic President Fumio Otsubo said in a joint press conference with his Sanyo counterpart Seiichiro Sano in Osaka that Panasonic intends to acquire a majority equity stake in Sanyo, but he didn't elaborate on how much Panasonic is expected to hold.
"We want to maximize our corporate value through the alliance of the two companies, which share similar ideals, to benefit both companies' shareholders and all other stakeholders including customers and employees," Otsubo said.
Sano said the undergoing global financial crisis prompted Sanyo to choose to sell the preferred shares of Sanyo held by its major creditor financial institutions "earlier than planned".
Panasonic is expected to acquire Sanyo's preferred shares through three major creditor institutions, namely -- Goldman Sachs Group Inc. of the United States, Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC Co. -- currently hold 430 million preferred shares, which were issued by Sanyo in 2006.
If concluded, the merger deal will create the world's second-largest electronics maker after General Electric Co. and also mark the first full-scale realignment of the domestic electronics industry involving major companies of Japan.
The two companies said in a joint statement earlier Friday that they are expected to provide supplementary technological assistance to each other to develop rechargeable batteries. Panasonic's global sales networks could also be utilized to expand Sanyo's solar and energy business.
Panasonic can also secure a dominant global market share in the rechargeable battery business and obtain a photovoltaic cell business that it currently does not own by buying into Sanyo, the world's largest supplier of lithium ion batteries.
The two companies could also utilize each other's marketing channels in the electronics and ecology business segments, and cooperate on technologies to reduce production and development costs.
They will announce the progress achieved during their talks by the end of this year, but may make an announcement earlier if they reach a certain agreement.
Panasonic President Fumio Otsubo and his Sanyo counterpart Seiichiro Sano are set to hold a press conference in Osaka later in the day.
If converted into common shares, the stock will represent about70 percent of Sanyo's outstanding issue in terms of voting rights.
Panasonic remained unscathed in the financial crisis. As one of the leading exporters of Japan, it reported record-high net profit of 128 billion yen for the April-September period, contributed by brisk sales of flat-panel TVs and DVD recorders.
Sanyo's net profit for the April-September period leaped 104.3 percent from a year earlier to 32.65 billion yen thanks to the sale of its mobile phone business to Kyocera Corp. But its operating profit fell 11.3 percent to 23.97 billion yen on higher raw materials cost and a rising yen.
Panasonic and Sanyo expect combined group sales of about 11.22 trillion yen for fiscal 2008, surpassing the 10.9 trillion yen Japan's industry leader Hitachi Ltd. foresees for the same fiscal year.
Panasonic changed its corporate name to the current one from Matsushita Electric Industrial Co. in October. Sanyo's founder Toshio Iue was a relative of Matsushita founder Konosuke Matsushita and worked for Matsushita before establishing Sanyo in 1947.