Panasonic Sanyo merger creates world's largest CE maker

Panasonic said it would acquire smaller rival Sanyo Electric, creating Japan's top electronics maker and foreshadowing further consolidation in an industry hit by slowing consumer demand.

The acquisition, which one analyst estimated could cost about $8.8bn (£5.4bn), would fortify Panasonic's competitiveness in rechargeable batteries and solar power equipment as demand grows for greener energy sources.

Panasonic would, at the same time, become the world's second-largest conglomerate with a major electronics division, behind General Electric and surpassing Hitachi as the biggest electronics maker in Japan.

But the deal carries risks and Panasonic has not said what it might pay for Sanyo, or what it plans to do with the latter's loss-making businesses such as home appliances and microchips.

"Strategically [the deal] makes sense, though it doesn't necessarily make sense for Panasonic to take on every single bit of Sanyo Electric," said Hannah Cunliffe, fund manager at Germany's Union Investment, which holds Panasonic shares. "There has to be some relatively aggressive restructuring."

Panasonic, the world's top plasma TV maker formerly known as Matsushita Electric, wants Sanyo because of its leading position in rechargeable batteries, which are widely used in mobile phones, PCs, music players and increasingly to power cars.

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

The deal would also enable Panasonic to enter the solar market. Sanyo is the world's seventh-largest solar cell maker, trailing Germany's Q-Cells, Japan's Sharp and Suntech Power of China.

"Adverse business conditions are making it difficult for us to achieve the kind of growth we have been striving for," Panasonic president Fumio Ohtsubo told a news conference. "We need a new growth engine within our group."

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