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April 16, 2007 10:15 pm

Sanyo starts to auction off chip business

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Sanyo has started the sale of its semiconductor operations, with bidders expected to express interest before the Golden Week holidays starting at the end of the month in Japan.

Goldman Sachs has sent letters to large private equity groups and semiconductor companies, inviting them to bid for the unit, which could fetch a few billion dollars.

Among those contacted are private equity groups Blackstone, Carlyle, Cerberus, Kohlberg Kravis Roberts, Permira and Texas Pacific Group; Japanese
semiconductor makers Elpida, Renesas and Rohm; and foreign companies, including Hynix and Infineon.

“We are targeting to start due diligence in mid-May,” said an official at one private equity firm in Tokyo that will participate in the auction. Sanyo is being advised by Goldman and Daiwa SMBC. Goldman had no comment.

Sanyo said it was “considering many schemes”, adding that “the key point is what will enable the business to grow”.

The sale of the semiconductor business comes at a tumultuous time for the embattled electronics group, which this month replaced its president after losing its chairman last month.

Sanyo is forecasting its third consecutive loss for the year to March 2007 after reporting a net loss of Y205.6bn ($1.72bn) last year, and a loss of Y171.5bn in the year to March 2005.

The group is in the middle of a restructuring programme driven by its largest shareholders – Sumitomo Mitsui Bank, Goldman and Daiwa SMBC. Together, they control about 60 per cent of the group’s voting rights, after injecting a combined Y300bn into Sanyo.

Sanyo is also cutting 2,200 jobs and is likely to sell its 16 per cent stake in Sanyo Electric Credit, its credit card affiliate, to GE Commercial Finance.

Sanyo’s semiconductor business suffered a sharp downturn after an earthquake damaged a factory in 2004. But the electronic components business was the second-largest earner in the nine months to December, reporting Y15.1bn in operating profits. The biggest earner was Sanyo’s battery business, which made Y27.6bn in profits.

The group, which has Y739bn in interest-bearing debt, is under pressure to deal with lossmaking white goods operations as well as its digital camera business. Its mobile phone business could be put up for sale, after a venture with Nokia fell through last year.

According to one potential investor, Sanyo may have to seek a partner for its solar battery business to maintain investment.

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