Panasonic, Sanyo Will Sell Battery Units to Win EU Merger OK

Sanyo and Panasonic have agreed to divest some of their battery production facilities in order to secure regulatory approval for their merger, the European Commission said Tuesday.

Panasonic plans to take over Sanyo to create the largest electronics firm and maker of laptop and mobile phone batteries in the world, in a deal valued at around US$9 billion. The deal has been approved by regulators in Japan and now the E.U., but it still needs clearance by authorities in the U.S. and China.

Europe's top competition regulator feared that the combined strength of the two companies would skew competition in the markets for primary cylindrical lithium batteries, portable rechargeable nickel-metal hydride batteries and rechargeable coin-shape batteries based on lithium.

The companies agreed to divest a European production plant that currently produces cylindrical lithium and rechargeable coin-shape batteries, the Commission said in a statement. They also agreed to sell one of their portable nickel-metal hydride businesses but the Commission wouldn't say which of the firms would make the divestment.

"In view of the remedies offered, I am satisfied that competition will remain vigorous after the merger and that purchasers of batteries will continue to benefit from choice and competitive prices," said Competition Commissioner Neelie Kroes in a statement announcing that the deal could go ahead.

Primary cylindrical lithium batteries are used in applications that require strong bursts of power and where the battery is used for long periods without replacement, such as alarms and utility meters.

Portable rechargeable nickel-metal hydride rechargeable batteries are used in products such as power tools, electric shavers, toys, portable scanners and two-way radios.

Rechargeable coin-shape batteries based on lithium are used principally as back-up power for real time clocks in mobile phones and digital still cameras, as well as in watches, laptops and keyless entry systems for cars.

The Commission also examined a number of consumer electronic product markets such as camcorders and flat panel televisions where both Panasonic and Sanyo compete. However, it concluded that both companies face competition from several other firms, and that their combined strength wouldn't increase their market share in any one market substantially.

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