Japan's Panasonic Corp <6752.T> plans to buy the shares it does not own in Sanyo Electric and another unit, four sources said, in a deal that could top $10 billion and strengthen its push into greener businesses.
The world's No.4 flat TV maker plans to raise up to 500 billion yen ($5.7 billion) in a new share issue to help it finance the buyouts, two sources said.
Panasonic stock plunged nearly 11 percent at one stage on fears the move would dilute existing shareholders, wiping about $3.5 billion off the company's market value. The share price fell to its lowest since March 2009.
As Panasonic speeds up a restructuring, four sources with knowledge of the deal said the company would buy the remaining shares in Sanyo Electric Co <6764.T> and Panasonic Electric Works Co Ltd <6991.T>.
The move is key to Panasonic's strategy of shifting focus to energy and environment-related businesses as it struggles to boost profits in overseas markets amid tough price competition from South Korea's Samsung Electronics <005930.KS> and LG Electronics <066570.KS>. It has said it would withdraw from overlapping business with Sanyo.
A deal would also make it easier for Panasonic to put more resources into its promising businesses such as solar power and lithium ion batteries.
The cost may not be small, but I think investors will welcome the deal as Panasonic can boost its rapidly growing environment-related business, said Okasan Securities analyst Kazumasa Kubota.
With only its audio and visual business, the firm could not expect to grow dramatically.
Panasonic bought a 50 percent stake in Sanyo in December for about $4 billion, gaining control of the world's top maker of rechargeable batteries and a producer of solar cells. It owns 51 percent of Panasonic Electric Works, which makes housing materials and lighting equipment.
Based on current market prices, acquiring the shares it does not own would cost Panasonic about 720 billion yen ($8.2 billion). A typical premium could push the value of the deal to above 900 billion yen.
Panasonic is considering a public cash offering and share swap to complete the transaction and could make an official announcement of its plans this week, according to the sources, who were not authorized to speak publicly about the deal.
The move will be good for Panasonic's long-term strategy, but investors are worried about how many new shares it will issue. We anticipated the deal but thought it would be done by a share swap, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. The news is negative for the share price in the short term.
Based on Panasonic's current market value of 2.86 trillion yen, the planned new share issues would boost the number of outstanding shares by about 18 percent.
At 0550 GMT, Panasonic shares were trading at 1,071 yen, off their lows but still down 8 percent and poised for the biggest decline in 20 months. Its share volume is already 6 times the average daily volume traded over the past 90 days.
Sanyo shares soared 28 percent to 151 yen, while Panasonic Electric Works was untraded amid a rush of buy orders. The benchmark Nikkei average <.N225> fell 0.6 percent.
Under President Fumio Ohtsubo, Panasonic has been shifting away from low-margin home electronics products and investing more aggressively in solar cells, batteries and other energy-related areas with promising growth prospects.
Ohtsubo unveiled a new three-year business plan in May under which Panasonic is aiming to roughly double its operating profit margin to 5 percent or more by March 2013, while boosting sales by a third to 10 trillion yen.
Panasonic and Sanyo have planned to withdraw from overlapping businesses that would account for 300 billion yen in annual revenue and merge the development and production of white goods.
(Additional reporting by Emi Emoto and Reiji Murai; Editing by Michael Watson and Dhara Ranasinghe)