Panasonic in Talks for Biggest U.S. Deal in a Decade

Panasonic in Talks for Biggest U.S., Europe Deals
Attendees attend a product demonstration in the Panasonic Corp. booth at the 2012 International Consumer Electronics Show in Las Vegas. Photographer: Daniel Acker/Bloomberg

Panasonic Corp. is in talks for acquisitions in the U.S. and Europe and may use its biggest deals there in a decade to speed a transition from television maker to supplier of solar energy systems and power storage.

“Acquisitions are in our sight as we need to seek a different business model in the U.S. and Europe,” Shusaku Nagae, who heads Panasonic’s Eco Solutions Co., said in an interview in Tokyo yesterday. Deals under consideration may be worth more than 10 billion yen ($125 million), he said, declining to elaborate because the discussions are private.

Panasonic, heading for a record $10 billion loss this fiscal year amid plunging TV prices, plans to expand its business selling bundled solar and power management services to businesses in the U.S. and Europe, Nagae said. The Osaka-based company’s Panasonic Electric Works Co. unit paid 172 million euros ($230 million) for Germany’s Vossloh Elektro GmbH in 2002, its last acquisition in the U.S. or Europe worth more than 10 billion yen and one of only three in the group’s history, according to data compiled by Bloomberg.

“We plan to start something we have never done before,” Nagae said. “In those countries, we can’t replicate the roof-top solar business we do in Japan.”

Panasonic, Japan’s largest solar panel maker after Sharp Corp. and Kyocera Corp., generates more than half of its revenue domestically, where it also builds and sells homes with built-in solar panels and systems to feed the power they generate into appliances and storage batteries.

Adapting Japan Model

The possible acquisitions in Europe and the U.S. are aimed at allowing the company to adapt this model to commercial properties including shopping centers or supermarkets in those countries, Nagae said. Germany, the world’s biggest solar power market, Italy, Spain are among the regions where demand is high for energy-saving products, he said.

Rival Sharp, Japan’s biggest solar-panel maker, agreed in 2010 to buy California’s Recurrent Energy for $305 million to expand into building power plants as it faces more competition from China-based manufacturers. Owning the San Francisco-based solar-power developer helps Osaka-based Sharp move further into the U.S. market for installing photovoltaic panels and building power plants to sell emissions-free electricity to utilities and commercial users.

The scale of Panasonic’s potential acquisitions won’t strain Panasonic’s cash flow and credit standing, Nagae said, declining to elaborate further on funding plans.

Cash Flow

Cash, near cash and short term investments fell to about 712 billion yen as of Dec. 31, from 1.21 trillion yen a year earlier and about 1.58 trillion yen as of Dec. 31, 2006, according to data compiled by Bloomberg.

Standard & Poor’s lowered Panasonic’s credit rating one level to A- on Feb. 22, the fourth lowest investment grade, citing the “commoditization of key products and the strong yen.”

Panasonic targets 1 trillion yen in annual revenue by 2018 for its business that integrates solar panels, battery systems, power-controlling units, light-emitting diode lamps and other appliances that reduce power consumption.

That compares with about 105 billion yen expected from the business for the year to March 2013 and 300 billion in 2016, Nagae said. Total sales at the maker of televisions, digital video recorders and home appliances will be about 8 trillion yen next fiscal year, according to the average of 20 analyst estimates compiled by Bloomberg.

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