Sanyo Electric, one of Japan’s biggest consumer electronics makers, said on Wednesday it was handing board control to consortium of investors, including Goldman Sachs, as it finalised a Y300bn injection designed to help it counter a crippling debt burden and steep earnings decline.
Satoshi Iue, the septuagenarian scion of the company’s founding family, resigned from the board on Wednesday together with two other directors. They will be replaced by directors selected by Goldman Sachs, Daiwa Securities SMBC and Sumitomo Mitsui Financial Group, the three banks that agreed to the injection.
They will provide the Y300bn in return for 428.6m preferred shares, to be sold at Y700 each. Each preferred share can be converted into 10 common shares from March 2007.
Goldman and Daiwa Securities will each buy about 42 per cent of the new shares, with SMFG acquiring the rest.
Sanyo Electric announced last month that it would raise the money from the three banks to boost its finances and pay for restructuring. The company, weighed down by heavy debts, has forecast a second record net loss of Y233bn for 2005-06.
The group’s plight underlines the problems that have beset Japanese consumer electronics makers generally. The profitability of the digital consumer products that drove earnings only a few years ago, such as DVD recorders and digital cameras, has dropped amid fierce competition and oversupply.
To make matters worse in Sanyo’s case, a large semiconductor factory suffered severe earthquake damage in 2004.
Just a few years ago, Sanyo Electric was lauded as “the GE of Osaka”. It is still the world’s biggest maker of rechargeable batteries. But along with other iconic consumer electronics names – Sony, Pioneer and JVC – the group is paying the price for failing to respond more quickly to its changing business environment.
Analysts have urged it to withdraw from areas in which it cannot compete, such as white goods and audio-visual products.
From ft.com