Over the past few days, the Japanese electronics giant has seen its stock price undone by a pair of announcements that shook investor confidence. Earlier this week, Panasonic seemed to confirm-by-not-denying media reports that it has bid $1.26 per share to acquire rival electronics maker Sanyo (Pink Sheets: SANYY.PK).
Just another takeover
If you think this is just another merger, think again. Right now, Sanyo and Panasonic are two of the biggest forces in manufacturing the rechargeable batteries used in "hybrid" cars. Oil prices may be down today, but automakers both foreign -- Toyota Motor
So, that explains Panasonic's interest in Sanyo. What about the sellers'? Three firms have sizeable stakes in Sanyo: Daiwa Securities, Sumitomo Mitsui Financial, and Goldman Sachs
Nor did Panasonic help its case when, yesterday, it slashed earnings guidance by 90%. Blaming restructuring costs, the Yen's "rapid appreciation" (up 14% against the U.S. dollar in three months), and a bleak economy, Panasonic expects to earn just $315 million for the fiscal year ending in March (fiscal 2009).
Profit from panic
Such a profit figure will give Panasonic a P/E of -- gulp! -- 78. But is that reason enough to sell the stock? I'm not so sure. Consider -- $315 million is only Panasonic's putative accounting profit. We won't know for several more months how cash-profitable the firm was in 2009. What we do know is that the market currently values Panasonic at less than 0.8 times its book value.
Methinks me spies value here, Fools. Watch closely and keep your wallet handy.
For more on the companies profiting from hybrid cars: