Posted by: Kenji Hall on December 18, 2008
Adding one yen per share hardly qualifies as a deal sweetener. And yet if you believe the reports today, Panasonic’s offer of 131 yen a share for Sanyo Electric—one yen more than the offer price two weeks ago—persuaded Goldman Sachs to unload its stake, ending nearly a month of hard-fought negotiations.
Panasonic and Sanyo will officially announce the deal, estimated at $9 billion, on Dec. 19, according to a person who has knowledge of the companies’ plans.
Why did Goldman suddenly give up trying to negotiate a bigger payout from a Panasonic-Sanyo deal? Nobody is talking on the record for now so it’s hard to say for sure. Among the three financial firms that ponied up money to rescue Sanyo in January 2006 for a combined 70% stake, Goldman alone had held out for more money. The other two, Sumitomo Mitsui Banking and Daiwa SMBC Capital, had reacted positively after Panasonic had raised its offer from the 120 yen a share it had proposed in late November.
Goldman probably realized that a nasty and protracted fight wouldn’t do it much good. For one thing, Sanyo would have a lot harder time boosting profits during a global recession, which meant that Goldman’s stake in Sanyo wasn’t about to skyrocket in value. In the end, Goldman looks set to walk away with almost double the $1.4 billion investment it made three years ago.
In Goldman’s defense, it helped whip Sanyo’s businesses into shape. The fact that Panasonic badly wanted Sanyo’s solar tech and battery know-how for gadgets and green cars should have given Goldman the upper hand in the talks.
But Goldman was on the losing side of a publicity war.
What Panasonic had offered wasn't going to leave the U.S. bank high and dry. Sumitomo Mitsui quickly accepted the terms--and for good reason. As both a creditor to and an investor in Sanyo, the Japanese bank wanted to ensure that its loans would be repaid, industry sources said. But Sumitomo Mitsui's conflict of interest wasn't widely reported. And Goldman's intransigence only seemed to reinforce what many Japanese saw as Wall Street's money-is-everything culture.
Goldman may have decided that squaring off with Sumitomo Mitsui, one of Japan's biggest banking groups, didn't make much sense either, especially since the two sides have a history of investing in each other. Some in the industry speculated that Goldman capitulated because it needed the cash after reporting its first-ever quarterly loss since going public in 1999. That part is difficult to prove.