Sanyo head agrees to Panasonic takeover: sources

TOKYO (Reuters) - The heads of Panasonic Corp (6752.T) and Sanyo Electric Co Ltd (6764.T) have agreed in principle to a deal that would see Panasonic take over Sanyo to create Japan's largest electronics maker, three people familiar with the matter said.

Panasonic, the world's largest plasma TV maker, and Sanyo, the No.1 supplier of rechargeable batteries, will likely make an announcement on the agreement soon, the people said, speaking on condition of anonymity as the deal is not yet public.

Reuters and other media had reported Saturday that Panasonic was in talks with Sanyo's top three shareholders -- Goldman Sachs (GS.N), Daiwa Securities SMBC and Sumitomo Mitsui Banking Co -- to buy their shares and take control of Sanyo.

Sources on Sunday told Reuters that Panasonic President Fumio Ohtsubo and Sanyo President Seiichiro Sano met last month and agreed in principle to Sanyo becoming a subsidiary, but that there has not been any agreement on details such as price.

Osaka-based Panasonic is now expected to start the due diligence process to check Sanyo's assets and begin full-fledged price negotiations with the three shareholders, the sources said.

Panasonic has already proposed at least one price that did not satisfy the three shareholders, sources told Reuters, underscoring the possibility that coming to a final agreement could prove difficult.

Panasonic spokesman Akira Kadota on Saturday declined to comment on whether the company was in talks with the three major Sanyo shareholders.

Sanyo spokesman Hiroyuki Okamoto said on Saturday the company has been looking into a variety of potential steps concerning the preferred shares owned by the three shareholders, but that nothing has been decided.

The three shareholders combined hold nearly 430 million Sanyo preferred shares, each of which can be exchanged for 10 common shares. That would value them at about 621 billion yen ($6.31 billion) based on Friday's closing price for the common shares.

Panasonic and Sanyo together would have revenues of 11.22 trillion yen, according to their forecasts for the year ending March 2009, surpassing the projected 10.9 trillion yen at Hitachi Ltd (6501.T), Japan's top electronics firm in sales.

Acquiring Sanyo would put Panasonic in a leading position in the global market for rechargeable batteries, which is expected to grow strongly as the use of portable electronic devices and hybrid or electric vehicles expands.

The move would also allow Panasonic, which is sitting on cash and cash equivalents of about $10 billion, to gain a foothold into the fast-growing solar market. Sanyo is the world's seventh-largest maker of solar cells.

Sanyo issued 300 billion yen in preferred shares to the three companies in 2006 to help it restructure after it suffered a sharp downturn in earnings, hit by fierce competition and earthquake damage to a key microchip plant.

Daiwa Securities SMBC is a joint venture between Daiwa Securities Group (8601.T) and Sumitomo Mitsui Financial Group (SMFG) (8316.T), while Sumitomo Mitsui Banking Corp is Sanyo's main bank and an SMFG unit.

Restrictions on converting them into common stock and selling them will be lifted next March, making it easier for the three main shareholders to make an exit on their investments.

If converted into common stock, the holdings would give them about 70 percent in the company.

Sanyo's shares closed on Friday at 145 yen, giving the company a market value of about 271 billion yen excluding preferred shares.