TOKYO (Reuters) - Goldman Sachs GS.N agreed to sell its 29 percent stake in Sanyo Electric 6764.T after Panasonic Corp 6752.T slightly sweetened its offer, three financial sources said, clearing the way for a deal worth at least $6.4 billion.
The move by Goldman, which, unlike two other major Sanyo shareholders, had rejected Panasonic’s earlier lower offers, came after the Wall Street firm reported its first quarterly loss since going public.
The combination of Panasonic, the world's biggest plasma TV maker, and Sanyo, the top producer of rechargeable batteries, would create Japan's No. 2 electronics manufacturer after Hitachi Ltd 6501.T with $120 billion in annual sales.
Sanyo shares closed down 1.4 percent at 141 yen on the news that a deal had been reached below the company’s current share price.
Panasonic and Sanyo plan to hold a news conference on Friday to give details of a planned tender offer, in which Panasonic will offer 131 yen per Sanyo share, the sources with direct knowledge of the matter said, 1 yen more than it had earlier offered this month.
Officials at Goldman Sachs and Panasonic declined to comment.
Goldman appears to have taken its chance to sell its stake, despite the price being far below what it had been seeking, due to the increasingly bleak outlook for Japanese consumer electronics makers.
Late last month, Panasonic, formerly known as Matsushita Electric, cut its annual net profit forecast by 90 percent and announced plans to restructure as the global financial crisis dampens sales of TVs and other electronics.
Some analysts have also said the market price of Sanyo shares may not have fully factored in a dilution in per-share value, which comes with the conversion of preferred shares into common shares.
Sumitomo Mitsui Banking, Daiwa Securities SMBC and Goldman hold nearly 430 million of Sanyo’s preferred shares, each of which can be exchanged for 10 common shares when a restriction is lifted in March.
If converted, Goldman and Daiwa Securities SMBC would each hold a 29 percent stake in Sanyo, while Sumitomo Mitsui Banking would hold 12 percent. The combined 70 percent stake would be worth about $6.4 billion, based on the offer price of 131 yen.
Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said Panasonic President Fumio Ohtsubo would have a tough time creating synergy effects even though the deal now looks set to go through.
“When things are good and top lines are growing, it is easy for Japanese companies to carry out restructuring. They are not very good at streamlining in an environment like this since no one would rehire the employees they let go,” he said.
“His pain from overseeing the birth of a successful merger has just begun.”
Hit by a global economic downturn and a surging yen, Japanese exporters are scrambling to cut costs by lowering production and delaying construction of new plants.
While Sanyo leads the market for rechargeable batteries, which are widely used in cell phones, PCs and increasingly in automobiles, struggling businesses such as microchips are dragging down its overall performance.
Shares in Panasonic fell 0.5 percent to 1,021 yen, compared with a 0.3 percent slide in the Tokyo stock market's electrical machinery index .IELEC.T.
Panasonic, which is sitting on $11 billion in cash, first offered about 120 yen per share to the three top shareholders of Sanyo, and later raised its offer by 10 yen.
Daiwa Securities SMBC and Sumitomo Mitsui Banking were considering the offer positively, sources have said. But Goldman earlier this month rejected the sweetened offer of 130 yen, saying the price was not fair for all Sanyo shareholders.
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 part of SMFG.
Additional reporting by Taiga Uranaka; Editing by Hugh Lawson and Chris Gallagher
Our Standards: The Thomson Reuters Trust Principles.