Panasonic Sanyo deal falters

Goldman Sachs has broken off talks with Panasonic for now on selling its stake in Sanyo after the electronics maker made an offer below Sanyo's current stock price.

Panasonic, the world's largest maker of plasma TVs, said this month that it wanted to buy smaller rival Sanyo but had not set a price with Goldman and Sanyo's two other main shareholders. The deal would boost Panasonic's competitiveness in rechargeable batteries and solar power equipment as demand grows rapidly for greener energy sources.

"We have reached the decision that there is no use in carrying out negotiations based on the current offer," Goldman Sachs spokeswoman Hiroko Matsumoto said.

But in a sign the talks may yet be revived, Matsumoto said the next step was up to Panasonic.

Mizuho Investors Securities analyst Nobuo Kurahashi said that Panasonic, which has $10 billion in cash and cash equivalents in its pocket, was unlikely to give up on Sanyo because of initial snags and that it may come up with a better offer.

"This is a rare opportunity for Panasonic to gain a new growth driver," Kurahashi said.

"And cash is the strongest asset in the current business environment. For Panasonic, the time must looks ripe to take advantage of its cash pile."

Goldman Sach's Matsumoto declined to disclose the details of Panasonic's offer, but company and financial sources close to the matter said it had offered 120 yen per Sanyo share, valuing the company at $7.8 billion.

Panasonic spokesman Akira Kadota declined to comment.

To acquire Sanyo, Panasonic has to buy out its top three shareholders, Daiwa Securities SMBC, Sumitomo Mitsui Banking Co and Goldman Sachs, which bailed out the company in 2006.

The Yomiuri Shimbun newspaper said on Tuesday that Panasonic was offering 120 yen a share because of an expected dilution in Sanyo's per-share value after the conversion of preferred shares, but Goldman aims to sell its stake for about 250 yen a share.

That price would put Sanyo's market capitalisation at 1.54 trillion yen ($16 billion) if the preferred shares were converted, making it more than twice as valuable as its bigger and more profitable rival, Sharp Corp.

Sanyo is the world's biggest maker of lithium-ion batteries, which are widely used in mobile phones, laptop computers and portable music players, and the seventh-largest in solar cells behind Sharp, Germany's Q-Cells and others.

Panasonic and Sanyo combined would be well-positioned to benefit from a shift in the auto industry to hybrid and electric vehicles.

Sanyo supplies nickel metal hydride batteries to Ford Honda; and develops lithium-ion batteries for cars with Volkswagen, while Panasonic runs a car battery venture with Toyota.

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