TOKYO (Reuters) - Japanese electronics maker Panasonic (6752.T) is in talks with Goldman Sachs (GS.N) and two other major shareholders of Sanyo Electric 6764.T to buy a controlling stake in its smaller rival, company and financial sources said on Saturday.
Talks with Daiwa Securities SMBC, Sumitomo Mitsui Banking and Goldman are at a preliminary stage and the firms have not entered into price negotiations, the sources said.
The three major 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 (3.9 billion pounds) based on Friday's closing price for the common shares.
If a deal is reached to buy all their holdings, Panasonic, already the world's largest plasma TV maker, could become Japan's top electronics firm by sales.
Panasonic and Sanyo combined are expected to post 11.22 trillion yen in revenue, according to their forecasts for the year ending March 2009, surpassing projected 10.9 trillion yen at Hitachi (6501.T), the country's current sales leader.
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.
"This appears to be the kind of deal where you add one and one and get three, instead of two. Their battery operations would truly be world-class," said Masayoshi Okamoto, head of trading at Jujiya Securities.
"Some Japanese companies are buying overseas firms to expand their operations abroad. But buying Japanese peers with strong products and consolidate the domestic industry, like what Panasonic is doing here, could be a short cut to profit and expansion."
The move would also allow Panasonic, sitting on cash and cash equivalents of about $10 billion (6.1 billion pounds), to gain a foothold in the fast growing solar energy market.
Panasonic spokesman Akira Kadota said nothing has been decided on the matter of Sanyo acquisition, and declined to comment on whether the company was in talks with the three 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 an SMFG unit.
Sanyo's shares closed Friday at 145 yen, giving the company a market value of about 271 billion yen, not including the value of the preferred shares.
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.
Restrictions on converting them to 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 the them a stake of about 70 percent in the company.
Sanyo spokesman Hiroyuki Okamoto said the company has been looking into a variety of potential steps concerning preferred shares, but that nothing has been decided.
Sanyo is the world's No.1 supplier of lithium-ion batteries competing with Sony (6758.T) and Panasonic. It is also the seventh-largest solar cell producer behind such rivals as Germany's Q-Cells QCEG.DE and Japan's Sharp (6753.T).
Sanyo President Seiichiro Sano told Reuters last month the three major shareholders were unlikely to sell their stakes in it by March 2011 despite the global financial crisis.
Writing by Nathan Layne and Kiyoshi Takenaka; Editing by Kim Coghill