Japan's Panasonic Corp <6752.T> said it would buy out subsidiaries Sanyo Electric <6764.T> and Panasonic Electric Works <6991.T> for up to $9.4 billion in cash and shares to accelerate its push into greener businesses.
The company, a sprawling conglomerate whose products range from flat-screen TVs to medical equipment, said it would raise up to 500 billion yen ($5.7 billion) in a new share issue to bolster its finances after completing the buyouts.
News of its plans, which were first reported by Reuters, triggered a 26 percent rally in Sanyo shares while pushing down Panasonic nearly 8 percent to a 16-month low, wiping out about $2.5 billion of its market value in unusually heavy trade.
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 which offer promising growth prospects.
Panasonic owns 51 percent of Panasonic Electric Works, a maker of housing materials and lighting equipment, and took a 50 percent stake in Sanyo last year to gain control of the world's top maker of rechargeable batteries used in electronics and cars.
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 said making the two subsidiaries wholly-owned would allow it to more effectively allocate management resources across the group as well as speed up decision making amid growing competition from overseas rivals.
South Korea's Samsung Electronics <005930.KS>, which has already surpassed Japanese electronics makers in flat TVs and several other products, is investing aggressively in renewable energy technology such as solar and rechargeable cells.
We thought we would never beat the competition if we maintained our current pace. It is like our competitors are running as if they are in a 100-meter dash and we are racing at a speed for a longer distance, Panasonic President Ohtsubo told a news conference.
Panasonic said it would launch a public tender offer for the two subsidiaries from August 23 to October 6. The Osaka-based firm will pay 138 yen for each Sanyo share, 9.5 percent higher than the average price over the past three months, and 1,110 yen for each Panasonic Electric Works share, a premium of 17 percent.
The electronics maker said it would acquire any shares not tendered through share exchanges by around April 2011, and estimates the total cost at about 818 billion yen ($9.4 billion).
Panasonic will use its treasury shares, worth about 400 billion yen at the current market price, to raise money in the market and for the share exchanges, allowing it to limit shareholder dilution, an investor relations official said.
The shelf registration for up to 500 billion yen in new shares could be tapped to replenish its capital after the acquisition, Panasonic said.
After making the two subsidiaries wholly owned, the maker of Viera flat TVs and Lumix digital cameras plans to realign its structure into three core businesses by January 2012 to beef up profitability.
Panasonic and Sanyo have been planning to withdraw from overlapping businesses that would account for 300 billion yen in annual revenue, and merge the development and production of white goods, among other measures to eliminate overlap.
Panasonic chief Otsubo said the acquisition of the two units would positively impact operating profit by about 60 billion yen.
Panasonic shares tumbled as much as 11 percent and closed down 7.7 percent at 1,077 yen, with volume spiking to 6 times the daily average over the past 3 months, as investors, worried about being diluted, dumped their shares.
Based on Panasonic's current market value of 2.64 trillion yen, the planned new share issue would boost the number of outstanding shares by about one fifth.
Sanyo shares soared 26.3 percent to 149 yen, while Panasonic Electric Works gained 15.4 percent to 1,124 yen. The benchmark Nikkei average <.N225> fell 0.6 percent.
(Additional reporting by Emi Emoto, Reiji Murai, Nobuhiro Kubo and Junko Fujita; editing by Anshuman Daga and Karen Foster)