Prospectus
Table of Contents

Filed pursuant to Rule 424(b)(3)

Registration No. 333-171125

 

 

Prospectus

Panasonic Corporation

 

 

Exchange for Shares of Common Stock of SANYO Electric Co., Ltd.

 

 

The boards of directors of Panasonic Corporation (“Panasonic”) and SANYO Electric Co., Ltd. (“SANYO”) have agreed to a share exchange (the “Share Exchange”) between the two companies under the Company Law of Japan (the “Company Law”). Panasonic and SANYO have entered into a share exchange agreement (the “Share Exchange Agreement”) that sets forth the terms of the Share Exchange. Pursuant to the Share Exchange, each shareholder of SANYO will receive 0.115 shares of Panasonic’s common stock for each share of SANYO’s common stock that such shareholder holds. The terms of the Share Exchange (along with certain related matters) require approval by the shareholders of SANYO. The board of directors of SANYO has convened an extraordinary general meeting of shareholders to seek such approval.

Based on the number of shares of SANYO’s common stock issued as of January 12, 2011, Panasonic expects to dispose of 2,425,474 own shares of its common stock in connection with the Share Exchange. Approximately 0.10% of those shares will be offered to shareholders of SANYO resident in the United States.

This document has been prepared for the shareholders of SANYO resident in the United States to provide detailed information in connection with the Share Exchange.

The date, time and place of the shareholders’ meeting of SANYO is expected to be Friday, March 4, 2011, at 10:00 a.m. (Japan Time), at The Main Hall in Umeda Arts Theater, 19-1, Chayamachi, Kita-ku, Osaka-City, Osaka, Japan.

To attend and vote at the shareholders’ meeting of SANYO, shareholders of SANYO must follow the procedures outlined in the convocation notice and the mail-in-ballot material which SANYO will send them.

The Share Exchange cannot be completed unless it is approved at the scheduled shareholders’ meeting of SANYO and certain other conditions are satisfied. The additional conditions and other terms of the Share Exchange are more fully described in this prospectus. For a discussion of these conditions, see “The Share Exchange.”

This document provides you with detailed information about the Share Exchange. It also provides you with important information about the shares of common stock of Panasonic to be transferred to SANYO shareholders in connection with the Share Exchange. You are encouraged to read this document in its entirety.

Panasonic shares are traded in yen on the Tokyo Stock Exchange, the Osaka Securities Exchange and the Nagoya Stock Exchange. Also, American Depositary Shares (“ADSs”), each representing one Panasonic share, are listed on the New York Stock Exchange (the “NYSE”) under the symbol “PC.” On February 9, 2011, the last reported sale price of Panasonic shares on the Tokyo Stock Exchange was ¥1,099 per share, and the last reported sale price of the ADSs on the NYSE was $13.34 per ADS.

You may have dissenters’ rights in connection with the transactions under Japanese law. See page 65 for a complete discussion of your dissenters’ rights, if any.

You should consider carefully the risk factors beginning on page 11 of this prospectus.

SANYO is not asking for a proxy and you are not required to send a proxy.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

The date of this prospectus is February 14, 2011.


Table of Contents

TABLE OF CONTENTS

 

     Page  

References to Additional Information

     1   

Forward-Looking Statements

     2   

Questions and Answers about the Share Exchange

     3   

Summary

     6   

Risk Factors

     11   

Selected Consolidated Financial Data of Panasonic

     19   

Selected Consolidated Financial Data of SANYO

     21   

Unaudited Pro Forma Condensed Consolidated Financial Information

     22   

Selected Historical and Pro Forma Per Share Data

     29   

Market Price and Dividend Information

     30   

Exchange Rates

     33   

Extraordinary General Meeting of SANYO Shareholders

     34   

The Share Exchange

     36   

Business of Panasonic

     67   

Business of SANYO

     83   

Regulation

     85   

Panasonic Management’s Discussion and Analysis of Financial Condition and Results of Operations

     87   

SANYO Management’s Discussion and Analysis of Financial Condition and Results of Operations

     116   

Directors and Management of Panasonic after the Share Exchange

     142   

Major Shareholders

     147   

Description of Panasonic’s Common Stock

     148   

Taxation

     159   

Comparison of Shareholders’ Rights

     166   

Experts

     166   

Validity of Panasonic Shares

     166   

Where You Can Find More Information

     166   

Enforceability of Civil Liabilities

     167   

Index to Financial Statements

     F-1   

 

Appendix A:

   Share Exchange Agreement (English translation)

Appendix B:

   Fairness Opinion of ABeam M&A Consulting Ltd., financial advisor to SANYO Electric Co., Ltd. (English translation)

Appendix C:

   Fairness Opinion of Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., financial advisor to SANYO Electric Co., Ltd. (English translation)

Appendix D:

   Selected Articles of the Company Law of Japan (English translation)

Appendix E:

   Unaudited U.S. GAAP Summary Financial Information of Panasonic for the Three and Nine Months Ended December 31, 2010

Appendix F:

   Unaudited U.S. GAAP Summary Financial Information of SANYO for the Three and Nine Months Ended December 31, 2010

 

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REFERENCES TO ADDITIONAL INFORMATION

This prospectus is part of a registration statement on Form F-4, which includes additional important business and financial information about Panasonic and SANYO that is not included in or delivered with this prospectus. This information is available to you without charge upon written or oral request. If you would like to receive any of the additional information, please contact:

 

Masahito Yamamura

   Koji Honda

Corporate Finance & IR Group

   Investor Relations Dept.

Panasonic Corporation

   SANYO Electric Co., Ltd.

1006, Oaza Kadoma

   5-5, Keihan-Hondori 2-Chome

Kadoma City, Osaka 571-8501

   Moriguchi City, Osaka 570-8677

Japan

   Japan

Telephone: 81-6-6908-1121

   Telephone: 81-6-6994-3480

IN ORDER TO OBTAIN TIMELY DELIVERY, YOU SHOULD REQUEST THE INFORMATION NO LATER THAN FEBRUARY 25, 2011, WHICH IS FIVE BUSINESS DAYS BEFORE YOU MUST MAKE A DECISION REGARDING THE SHARE EXCHANGE.

For additional information about Panasonic and SANYO, see “Where You Can Find More Information.”

As used in this prospectus, references to “Panasonic” are to Panasonic Corporation, references to “SANYO” are to SANYO Electric Co., Ltd. and references to “PEW” are to Panasonic Electric Works Co., Ltd., in each case on a consolidated basis except where the context otherwise requires. Also, references to the “Share Exchange” are to the proposed share exchange between Panasonic and SANYO, and references to the “Panasonic-PEW Share Exchange” are to the proposed share exchange between Panasonic and PEW.

As used in this prospectus, except where the context otherwise requires, references to the “shareholders’ meeting” of SANYO or to the “meeting” of SANYO shareholders are to the extraordinary general meeting of shareholders of SANYO that is scheduled to take place on March 4, 2011, at which SANYO’s shareholders will vote on the terms of the Share Exchange and certain related matters. See “Extraordinary General Meeting of SANYO Shareholders.”

As used in this prospectus, “dollar” or “$” means the lawful currency of the United States of America, and “yen” or “¥” means the lawful currency of Japan.

As used in this prospectus, “U.S. GAAP” means accounting principles generally accepted in the United States, and “Japanese GAAP” means accounting principles generally accepted in Japan.

In tables appearing in this prospectus, figures may not add up to totals due to rounding.

“The year ended March 31, 2010” or “fiscal 2010” refers to our fiscal year ended March 31, 2010 and other fiscal years are referred to in a corresponding manner.

 

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FORWARD-LOOKING STATEMENTS

This document includes forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) that reflect the plans and expectations of Panasonic in relation to, and the benefits resulting from, the proposed transactions described herein. To the extent that statements in this document do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of Panasonic in light of the information currently available to it, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause Panasonic’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Panasonic undertakes no obligation to publicly update any forward-looking statements after the date of this document. Investors are advised to consult any further disclosures by Panasonic in its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the U.S. Securities Exchange Act of 1934 and its other filings.

The risks, uncertainties and other factors referred to above include, but are not limited to, economic conditions, particularly consumer spending and corporate capital expenditures in the United States, Europe, Japan, China and other Asian countries; volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; currency rate fluctuations, notably between the yen, the U.S. dollar, the euro, the Chinese yuan, Asian currencies and other currencies in which Panasonic operates businesses, or in which assets and liabilities of Panasonic are denominated; the possibility of Panasonic incurring additional costs of raising funds, because of changes in the fund raising environment; the ability of Panasonic to respond to rapid technological changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both price and technology; the possibility of not achieving expected results from alliances or mergers and acquisitions including the acquisition of all shares of PEW and SANYO through tender offers and share exchanges; the ability of Panasonic to achieve its business objectives through joint ventures and other collaborative agreements with other companies; the possibility of not achieving the expected benefits from our midterm management plan; the ability of Panasonic to maintain competitive strength in many product and geographical areas; the possibility of incurring expenses resulting from any defects in products or services of Panasonic; the possibility that Panasonic may face intellectual property infringement claims by third parties; current and potential, direct and indirect restrictions imposed by other countries over trade, manufacturing, labor and operations; fluctuations in market prices of securities and other assets in which Panasonic has holdings or changes in valuation of long-lived assets, including property, plant and equipment and goodwill, deferred tax assets and uncertain tax positions; future changes or revisions to accounting policies or accounting rules; as well as natural disasters including earthquakes, prevalence of infectious diseases throughout the world and other events that may negatively impact business activities of Panasonic.

 

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QUESTIONS AND ANSWERS ABOUT THE SHARE EXCHANGE

 

Q. Why is Panasonic proposing the Share Exchange?

 

A. The Share Exchange is the final step in Panasonic’s turning SANYO into a wholly-owned subsidiary. In order to implement a capital and business alliance with SANYO, Panasonic completed an initial tender offer for shares of SANYO’s common stock and preferred stock in December 2009, and as a result of conversion of all shares of preferred stock into shares of common stock, Panasonic became the owner of 50.2% of SANYO’s voting rights, and accordingly started consolidating SANYO in its financial statements. On July 29, 2010, Panasonic announced that it would acquire all shares of SANYO that it did not already own through a tender offer and, if necessary, a second-step share exchange, and SANYO announced that its board of directors endorsed the tender offer. On October 6, 2010, Panasonic completed the tender offer at a price of ¥138 per share and, as a result, increased its ownership percentage to approximately 81% of SANYO’s voting rights. By turning SANYO into a wholly-owned subsidiary, Panasonic aims to speed up strategy execution and take further advantage of the total strengths of the Panasonic Group to effectively compete against global competitors.

 

Q. What will SANYO shareholders receive in the Share Exchange?

 

A. SANYO shareholders as of the moment immediately preceding the Share Exchange will receive 0.115 shares of Panasonic’s common stock for each share of SANYO’s common stock which they hold.

 

Q. Does the board of directors of SANYO recommend the Share Exchange?

 

A. Yes. The board of directors of SANYO unanimously recommends that shareholders vote for the Share Exchange.

 

Q. How will fractions of a share be treated in the Share Exchange?

 

A. SANYO shareholders will not receive any fractions of a share of Panasonic’s common stock in the Share Exchange. Instead, the shares representing the aggregate of all such fractions (in case where such aggregated shares still include any fraction less than one share, such fraction shall be rounded off) will be sold in the Japanese market or sold to Panasonic and the net cash proceeds from the sale will be distributed to the former holders of SANYO shares on a proportionate basis in accordance with their respective fractions.

 

Q. How do the legal rights of Panasonic shares differ from those of SANYO shares?

 

A. There are no material differences between or among the rights of shareholders of Panasonic’s common stock and SANYO’s common stock from a legal perspective.

 

Q. When is the Share Exchange expected to be completed?

 

A. The Share Exchange is expected to be completed on April 1, 2011.

 

Q. How will trading in SANYO shares be affected in connection with the completion of the Share Exchange?

 

A. SANYO expects that its shares will be delisted from the Tokyo Stock Exchange and the Osaka Securities Exchange about three trading days before April 1, 2011.

 

Q. Will SANYO shareholders receive dividends on common stock for the year ending March 31, 2011?

 

A. No. SANYO shareholders will not receive dividends on common stock for the year ending March 31, 2011.

 

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Q. Can the number of shares of Panasonic’s common stock for which the shares of SANYO’s common stock are exchanged change between now and the time the transaction is completed?

 

A. No. The exchange ratio is fixed, and it will not change even if the trading price of Panasonic’s or SANYO’s common stock changes between now and the time the Share Exchange is completed. See “Risk Factors” beginning on page 11.

 

Q. What is the record date for voting at the shareholders’ meeting?

 

A. Holders of SANYO shares as of January 12, 2011 will be eligible to vote at the shareholders’ meeting expected to be held on March 4, 2011.

 

Q. How do I vote at the shareholders’ meeting?

 

A. You may exercise voting rights by mail-in-ballot or attending the meeting in person or through attorney-in-fact. SANYO will distribute materials to shareholders that will enable them to exercise their voting rights. Completed mail-in-ballots must be received at least one day before the shareholders’ meeting.

 

Q. May I change my vote?

 

A. Yes. If you want to change your vote expressed by mail-in-ballot, you must attend the meeting personally or through another shareholder you appoint as your attorney-in-fact, or send another mail-in-ballot dated a later date than the previous mail-in-ballot if SANYO redistributes mail-in-ballots. By attending the meeting in person you automatically revoke your mail-in-ballot.

 

Q. How will shares represented at the shareholders’ meeting by mail-in-ballots be treated?

 

A. The mail-in-ballots used for the shareholders’ meeting of SANYO will describe the proposals to be voted on by shareholders at the meeting, including approval of the Share Exchange. The mail-in-ballots will allow shareholders to indicate a “for” or “against” vote with respect to each proposal. In accordance with Japanese law and practice, SANYO intends to count toward the quorum requirements for its shareholders’ meeting the shares represented by mail-in-ballots that are returned without indicating a “for” or “against” vote for any of the proposals, and count these mail-in-ballots as having voted “for” the approval of the Share Exchange and other related proposals.

 

Q. Do I have dissenters’ rights?

 

A. Under the Company Law, you are entitled to dissenters’ rights of appraisal in connection with the Share Exchange if you comply with the procedures set forth in the Company Law and share handling regulations of SANYO. Any SANYO shareholder (i) who notifies SANYO prior to the shareholders’ meeting of his or her intention to oppose the Share Exchange, and who votes against the approval of the Share Exchange at the shareholders’ meeting, or (ii) who is not entitled to vote at such general meeting of shareholders, and complies with the other relevant procedures set forth in the Company Law, may demand that SANYO purchase his or her shares of SANYO’s common stock at the fair value. The failure of a shareholder of SANYO who is entitled to vote at such general meeting of shareholders to provide such notice prior to the shareholders’ meeting or to vote against the approval of the Share Exchange at the shareholders’ meeting will in effect constitute a waiver of the shareholder’s right to demand that SANYO purchase his or her shares of SANYO’s common stock at the fair value.

 

Q. What are the Japanese tax consequences of the Share Exchange?

 

A. Based on certain assumptions and subject to certain limited exceptions, the Share Exchange is expected to be a tax-free transaction for Japanese tax purposes for holders of shares of SANYO’s common stock who will be allotted shares of Panasonic’s common stock. As such, non-resident holders of shares of SANYO’s common stock will generally not recognize any gains or losses for Japanese tax purposes at the time of the Share Exchange. See “Taxation—Japanese Tax Consequences” beginning on page 159.

 

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Q. What are the U.S. federal income tax consequences of the Share Exchange to U.S. holders of SANYO shares?

 

A. Panasonic expects that the Share Exchange to be a taxable event for U.S. federal income tax purposes. As a result, U.S. Holders will generally recognize a capital gain or loss measured by the difference between (i) the sum of (A) the fair market value (in U.S. dollars) of Panasonic’s common stock received in exchange for their SANYO’s shares and (B) any cash received in lieu of fractional shares of Panasonic’s common stock, and (ii) their tax basis in the shares of SANYO’s common stock they hold. Such capital gain or loss will be long-term capital gain or loss if, at the time of the exchange, their holding period in their shares of SANYO’s common stock exceeds one year. For further discussion, see “Taxation—Material U.S. Federal Income Tax Consequences” beginning on page 161.

 

Q. Is consummation of the Share Exchange conditioned upon successful execution of the Panasonic-PEW Share Exchange?

 

A. No. The Share Exchange is a transaction independent from the Panasonic-PEW Share Exchange and will be consummated, subject to necessary approvals and other conditions, whether or not the Panasonic-PEW Share Exchange actually occurs.

 

Q. Who can I call with questions?

 

A. If you have more questions about the Share Exchange, you should contact:

Masahito Yamamura

Corporate Finance & IR Group

Panasonic Corporation

1006, Oaza Kadoma

Kadoma City, Osaka 571-8501

Japan

Telephone: 81-6-6908-1121

Koji Honda

Investor Relations Dept.

SANYO Electric Co., Ltd.

5-5, Keihan-Hondori 2-Chome,

Moriguchi City, Osaka 570-8677

Japan

Telephone: 81-6-6994-3480

 

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SUMMARY

This summary highlights selected information from this document. It does not contain all the information that is important to you. You should read carefully the entire document to fully understand the Share Exchange.

Companies

Panasonic is one of the world’s leading producers of electronics and electric products. Panasonic currently offers a comprehensive range of products, systems and components for consumer, business and industrial use based on sophisticated electronics and precision technology, expanding to building materials and equipment, and housing business. A consolidated subsidiary of Panasonic since December 2009, SANYO manufactures and sells products in three fields: energy (solar cells and rechargeable batteries), ecology (commercial equipment, home appliances and car electronics) and electronics (electronic devices and digital system devices). SANYO has developed these businesses globally.

Panasonic’s principal executive offices are located at 1006, Oaza Kadoma, Kadoma City, Osaka 571-8501, Japan, and its telephone number is 81-6-6908-1121. SANYO’s principal executive offices are located at 5-5, Keihan-Hondori 2-Chome, Moriguchi City, Osaka 570-8677, Japan, and its telephone number is 81-6-6991-1181.

The Share Exchange

The boards of directors of Panasonic and SANYO have agreed to the Share Exchange, to be approved by SANYO’s shareholders at a shareholders’ meeting. Under the Share Exchange, each shareholder of SANYO registered as of the moment immediately preceding the Share Exchange will receive 0.115 shares of Panasonic’s common stock for each share of SANYO’s common stock that such shareholder holds. If the Share Exchange Agreement is approved by the shareholders of SANYO, and if the other conditions to completing the Share Exchange are satisfied, the Share Exchange is expected to become effective on April 1, 2011.

Notice of Meeting

To seek shareholders’ approval of the terms of the Share Exchange and certain other matters, the board of directors of SANYO has convened an extraordinary general meeting of shareholders. Under Japanese law, the notice of a general meeting of shareholders must be dispatched two weeks in advance to all shareholders of record having voting rights. SANYO will mail out its notices on such date as to be determined.

The affirmative vote of shareholders representing a two-thirds majority of the voting rights of the shareholders of SANYO represented at the shareholders’ meeting is required to approve the Share Exchange. Each shareholder is entitled to one vote per one unit of shares, which is comprised of 1,000 shares, subject to the limitation by the “Unit share system.” The required quorum for vote on the Share Exchange at the shareholders’ meeting is a one-third majority of the voting rights of the shareholders of SANYO who are entitled to exercise their voting rights.

The date, time and place of the meeting is expected to be Friday, March 4, 2011, at 10:00 a.m. (Japan Time), at The Main Hall in Umeda Arts Theater, 19-1, Chayamachi, Kita-ku, Osaka-City, Osaka, Japan.

Shareholders may attend the meeting in person or by proxy using a duly authorized power of attorney, or by mail-in-ballot.

 

 

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At the meeting, you will be allowed to vote upon the terms of the Share Exchange approved by the boards of directors of Panasonic and SANYO.

Reasons for the Share Exchange

The business environment surrounding the Panasonic Group continues to change dramatically and rapidly. Thus, it is indispensable for the Panasonic Group to speed up strategy execution and take further advantage of the total strengths of the group in order to effectively compete against the competition and achieve business growth in new markets. As a result, Panasonic made a determination to turn both SANYO and PEW, which are both currently consolidated subsidiaries, into wholly-owned subsidiaries through simultaneous first-step tender offers and subsequent share exchanges.

Through ownership of all of the shares of both SANYO and PEW, Panasonic intends to dynamically accelerate, and to achieve further progress under its business plan by promoting rapid decision making and maximizing group synergies. Panasonic, PEW and SANYO intend to pursue the establishment of the new Panasonic Group, under which the three companies will be genuinely integrated, and will make efforts to (i) maximize value creation by strengthening contacts with customers, (ii) realize speedy and lean management, and (iii) accelerate business growth by boldly shifting management resources.

Furthermore, in order to realize these objectives, the Panasonic Group’s business organization is scheduled to be restructured by around January 2012. From the perspective of “maximization of customer value,” the basic policy of such restructuring is to integrate and reorganize the business and marketing divisions of the three companies into three business sectors: “Consumer,” “Components and Devices” and “Solutions,” and to design optimal business models that are most suitable for the character of each business. In addition, the Panasonic Group will reorganize its current 16 domain companies into nine, based on these new business sectors and as described below. The Panasonic Group will make efforts to establish a business organization under which it can effectively compete against global competitors in each business and in each industry.

Currently, direction of the reorganization of each business sector is expected to be as follows:

 

   

Consumer business sector:

The Panasonic Group intends to reorganize its marketing function on a global basis, and reorganize its marketing divisions, including Japan, to a global consumer marketing division. Under the reorganization, the Panasonic Group intends to enhance the function of its frontline business and accelerate the creation of customer-oriented products. Also, the Panasonic Group intends to work to strengthen, among others, its overseas consumer business by strategically distributing its marketing resources in Japan and overseas.

The Panasonic Group expects that the consumer business sector will have two domain companies: (1) AVC networks and (2) heating/refrigeration/air condition and home appliances. The AVC networks domain company will focus on creation of new businesses with next-generation products, with a unified concept of business and technology. The heating/refrigeration/air condition and home appliances domain company will aim to be the leading green innovation company in the home appliances business, with a strong line-up ranging from consumer use to commercial use, and is expected to globally expand its business in personal care and health enhancing products and cooking appliances.

 

   

Components and Devices business sector:

The Panasonic Group intends to strengthen cooperation among the development, production and sales functions for each component and device having a common business model. By combining marketing

 

 

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and technology, the Panasonic Group intends to strengthen its “proposal-style” business, which foresees the potential needs of customers and aim to expand the business as an independent business that does not rely on internal needs. Particularly in this business sector, the Panasonic Group intends to continue to make maximum use of SANYO’s strengths, such as its rechargeable batteries business and solar business, as well as its customer network.

Specifically, the Panasonic Group expects that the components and devices business section will have three domain companies: (1) automotives, (2) devices and (3) energy devices. These three domain companies are expected to cooperate in providing strategic customer services and conducting new sales development, with a department established for the purposes of such cooperation. The automotive domain company will aim to strengthen multimedia systems displays, create new growth markets such as EV and e-cockpit, and establish a robust Japanese market share for car navigation systems. The devices domain company will aim to develop new markets and customer with new products and technologies, and focus on environment and energy, healthcare and medical, material and devices, automotives and emerging markets. The energy devices domain company will aim especially to strengthen its lithium-ion battery and solar battery businesses.

 

   

Solutions business sector:

The Panasonic Group intends to unify the development, production and sales functions for each solution for business customers. The Panasonic Group aims to offer the most suitable products, services and solutions as quickly as possible, grasping customers’ needs in as timely a fashion as possible. In addition, the “comprehensive solutions for the entire home, the entire building and the entire town” that encompass these solutions will be accelerated. Particularly in this business sector, the Panasonic Group intends to continue to make maximum use of the strength and customer network of PEW.

Specifically, the Panasonic group expects that the solutions business sector will have four domain companies: (1) security and communication solutions, (2) environment and energy solutions, (3) healthcare and medical solutions, and (4) factory solutions. The security and communications solutions domain company will aim to provide “network” solutions with the Panasonic Group’s comprehensive technologies, from fixed to wireless communications, including mobile phones. The environment and energy solutions domain company will focus on contributing to a comfortable eco-conscious lifestyle, and aim for unconventional growth through comprehensive solutions and sales, and effective collaboration with other domain companies. The healthcare and medical solutions domain company is expected to serve as a pillar of the next generation business and assist in providing simple and affordable healthcare service, including contributing to the robot business with products such as a “robotic bed”. The factory solutions domain company will aim to contribute to the progress and development of global society with manufacturing solutions, including the development of new businesses in mounting and circuit fabrication and welding, and laser technology.

In addition, the environment and energy domain company will lead the “comprehensive solutions” initiative, which will involve four steps: (1) offer a packaged series as a whole set to a specific space, (2) utilize network-packaged equipment, (3) have a vertical value chain business to offer coherent value from sales to customer services, and (4) create a unique “comprehensive solutions” business model. The goal is to create such a unique business model that combines vertical and horizontal value chains from the planning stage through participation in the “smart city” projects in the world.

In addition to the reorganization, the head office will aim for a “lean and speedy” global head office by strengthening its strategic functions, while integrating and streamlining the three companies’ organizations. The nine domain companies will be responsible for managing their businesses autonomously, while the new head office will focus on three functions: (1) develop a group-wide growth strategy, (2) establish group core competencies and (3) offer services beyond the domain companies’ capabilities. The new head office is expected

 

 

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to have a global head office to govern the Panasonic Group based on each functional classification and regional management companies based on each region. By organizing the head office with a focus on indispensable functions, the Panasonic Group believes that it will be able to create new local businesses and solve local issues.

Further, together with this reorganization, Panasonic Group intends to integrate its brands, in principle, into “Panasonic” in the future. However, Panasonic Group expects that “SANYO” will continue to be partially utilized, depending on the particular business or region.

Panasonic Group believes that the business reorganizations mentioned above will promote the integration of the three companies’ advantages and the “proposal” capabilities for “comprehensive solutions,” and will enable rapid increase in global competitiveness especially in the “energy systems,” “heating/refrigeration/air conditioning” and “network AV” business, which are core businesses to lead sales and profits of the entire group companies. Also, in each business such as “healthcare,” “security,” and “LED,” which is positioned as a “key business for the next generation,” Panasonic will make efforts to accelerate the growth of such business by combining the capacities of the three companies for research and development, as well as market development.

Additionally, Panasonic intends to realize further reinforcement of management structure and cost competitiveness through business integration and unification of the business bases of the three companies, and through optimizing and streamlining its head office organization.

No Solicitation of Proxies, Consents or Authorizations

SANYO’s management is not soliciting proxies, consents or authorizations with respect to the Share Exchange prior to the extraordinary general meeting of shareholders.

Expiration of the Share Exchange Agreement

The Share Exchange Agreement shall cease to have any effect if, among others, the Share Exchange Agreement is not approved at the shareholders’ meeting of SANYO.

Dissenters’ Rights

Under Japanese law, you may have dissenters’ rights of appraisal in connection with the Share Exchange. See “The Share Exchange—Dissenters’ Appraisal Rights” for a complete discussion of dissenters’ rights.

Material Tax Consequences

Japanese Taxation

Based on certain assumptions and subject to certain limited exceptions, the Share Exchange is expected to be a tax-free transaction for Japanese tax purposes for holders of shares of SANYO’s common stock who will be allotted shares of Panasonic’s common stock. As such, non-resident holders of shares of SANYO’s common stock will generally not recognize any gains or losses for Japanese tax purposes at the time of the Share Exchange. See “Taxation—Japanese Tax Consequences.”

 

 

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Material U.S. Federal Income Tax Consequences

Panasonic expects that the Share Exchange to be a taxable event for U.S. federal income tax purposes. As a result, U.S. Holders will generally recognize a capital gain or loss measured by the difference between (i) the sum of (A) the fair market value (in U.S. dollars) of Panasonic’s common stock received in exchange for their SANYO’s shares and (B) any cash received in lieu of fractional shares of Panasonic’s common stock, and (ii) their tax basis in the shares of SANYO’s common stock they hold. Such capital gain or loss will be long-term capital gain or loss if, at the time of the exchange, their holding period in their shares of SANYO’s common stock exceeds one year. For further discussion, see “Taxation—Material U.S. Federal Income Tax Consequences” beginning on page 161.

Accounting Treatment of the Share Exchange

The Share Exchange will be accounted for by Panasonic as equity transactions in accordance with U.S. GAAP. See “The Share Exchange—Accounting Treatment.”

Risk Factors

In determining whether to vote to approve the Share Exchange, you should consider carefully the risk factors beginning on page 11 of this prospectus.

Trading Markets for Shares of Panasonic’s Common Stock

Panasonic’s common stocks are currently traded on the First Sections of the Tokyo Stock Exchange, the Osaka Securities Exchange and the Nagoya Stock Exchange. Also, American Depositary Shares, each representing one Panasonic share, are listed on the New York Stock Exchange.

 

 

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RISK FACTORS

Prior to making a decision on the Share Exchange, you should carefully consider, along with other matters set out in this prospectus, the following considerations:

Risks Relating to the Share Exchange

The exchange ratio for the Share Exchange is fixed and will not be adjusted to reflect changes in the market values of Panasonic’s and SANYO’s common stock; as a result, the value of Panasonic’s common stock you receive in the transaction may be less than when you vote on the Share Exchange

Upon the completion of the Share Exchange, each share of SANYO’s common stock will be exchanged for 0.115 shares of Panasonic’s common stock. The ratio at which SANYO’s common stock will be exchanged for Panasonic’s common stock is fixed, and will not be adjusted for changes in the market prices of either company’s common stock. Therefore, even if the relative market values of Panasonic’s and SANYO’s common stock change, there will be no change in the number of shares of Panasonic’s common stock which shareholders of SANYO will receive in the Share Exchange.

Any change in the prices of either company’s common stock occurring prior to the effective date of the Share Exchange will affect the value that holders of SANYO’s common stock receive in the Share Exchange. The value of the Panasonic’s common stock to be received in the Share Exchange (which will occur approximately one month after the extraordinary general meeting of shareholders) may be higher or lower than the indicative value as of the date of this prospectus and/or as of the date of the extraordinary general meeting of SANYO shareholders, depending on the prevailing market prices of Panasonic’s and SANYO’s common stock.

The share prices of Panasonic’s and SANYO’s common stock are subject to the general price fluctuations in the market for publicly traded equity securities and have experienced significant volatility in the past. Stock price changes may result from a variety of factors that are beyond the control of Panasonic and SANYO, including actual changes in, or investor perception of, Panasonic’s and SANYO’s businesses, operations and prospects. Regulatory developments, as well as current or potential legal proceedings, and changes in general market and economic conditions may also affect the stock price of Panasonic or SANYO.

You should obtain and review recent market quotations for Panasonic’s and SANYO’s common stock before voting on the Share Exchange. There can be no assurances as to the future market prices of Panasonic’s and SANYO’s common stock before the completion of the Share Exchange, nor of the market price of Panasonic’s common stock at any time after the completion of the Share Exchange.

Significant costs and expenses have been and are being incurred in the course of the Share Exchange and the Panasonic-PEW Share Exchange and subsequent consolidation of the business operations of the three companies

Significant costs and expenses have been and are being incurred related to the transactions contemplated herein. These costs and expenses include financial advisory, legal and accounting fees and expenses, arrangement fees to financial institutions, reorganization and restructuring costs, severance/employee benefit-related expenses, filing fees, printing expenses and other related charges. There may be significant costs in compensating dissenting shareholders who exercise their appraisal rights. There may also be additional unanticipated significant costs in connection with the any subsequent reorganization which we may not recoup.

Turning PEW and SANYO into wholly-owned subsidiaries may not produce the benefits anticipated by Panasonic

Through turning PEW and SANYO into wholly-owned subsidiaries through the tender offers and share exchanges described herein, Panasonic aims to promote more rapid decision-making and maximize group

 

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synergies, including through a restructuring of Panasonic’s business organization to be completed by around January 2012. However, in order to achieve such benefits, the operations of the three companies will need to be reorganized and their resources will need to be combined in a timely and flexible manner. There can be no assurance that Panasonic will be able to implement these steps as anticipated. For example, factors that could cause a delay in the implementation of these plans include negotiations with labor unions and the ability to integrate the “Panasonic” brand name. If Panasonic fails to achieve the planned restructuring effectively within the time frame that is currently contemplated or to the extent that is currently planned, or if for any other reason the expected group synergies fails to materialize, these transactions may not produce the benefits anticipated by Panasonic.

Risks Relating to the Business of Panasonic

Continued or further weakness in Japanese and global economies may cause reduced demand for Panasonic’s products

Demand for Panasonic’s products and services may be affected by general economic trends in the countries or regions in which Panasonic’s products and services are sold. Economic downturns and resulting declines in demand in Panasonic’s major markets worldwide may thus adversely affect Panasonic’s business, operating results and financial condition. Triggered by the financial crisis in fiscal 2009, Panasonic’s business environment rapidly deteriorated due to declines in global consumption and business activities and due to intensified price competition. Regarding the business environment for fiscal 2011, ending March 31, 2011, Panasonic currently anticipates market conditions to remain unpredictable due to various factors including the yen’s appreciation and ever-intensified global competition, despite a gradually recovering global economy. Panasonic may incur increased costs for additional business restructuring in order to cope with the business environment. If global market conditions worsen beyond expectations, the business environment of Panasonic may deteriorate more than currently anticipated, which may adversely affect Panasonic’s business, operating results and financial condition.

Currency exchange rate fluctuations may adversely affect Panasonic’s operating results

Foreign exchange rate fluctuations may adversely affect Panasonic’s business, operating results and financial condition, because its international business transactions and costs and prices of its products and services in overseas countries are affected by foreign exchange rate changes. In addition, foreign exchange rate changes can also affect the yen value of Panasonic’s investments in overseas assets and liabilities because Panasonic’s consolidated financial statements are presented in Japanese yen. Generally, an appreciation of the yen against other major currencies such as the U.S. dollar and the euro may adversely affect Panasonic’s operating results. Meanwhile, a depreciation of the yen against the aforementioned major currencies may have a favorable impact on Panasonic’s operating results. The global financial crisis, which occurred in 2008, caused the rapid appreciation of the yen against other major currencies, which adversely and significantly affected Panasonic’s operating results in fiscal 2009 and fiscal 2010. Any further or continued appreciation of the yen may adversely affect Panasonic’s business, operating results and financial condition.

Interest rate fluctuations may adversely affect Panasonic’s financial condition, etc.

Panasonic is exposed to interest rate fluctuation risks which may affect Panasonic’s operational costs, interest expenses, interest income and the value of financial assets and liabilities. Accordingly, interest rate fluctuations may adversely affect Panasonic’s business, operating results and financial condition.

Continuation or deterioration of financial market turmoil may adversely affect Panasonic’s ability to raise funds or may increase the cost of fund raising

Panasonic raises funds for its business through methods such as borrowing from financial institutions and issuance of bonds and commercial papers. Where, among other events, financial market turmoil continues or deteriorates, financial institutions reduce lending to Panasonic, or rating agencies downgrade Panasonic’s credit ratings, Panasonic may not be able to raise funds in the time and amount necessary for Panasonic, or under

 

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conditions which Panasonic deems appropriate, and Panasonic may incur additional costs of raising funds, which may adversely affect Panasonic’s business, operating results and financial condition.

Decreases in the value of Japanese stocks may adversely affect Panasonic’s financial results

Panasonic holds mostly Japanese stocks as part of its investment securities. The value of such stocks has dropped significantly due to the world financial crisis and the recession of Japanese economy in fiscal 2009, causing Panasonic to record losses on valuation of its investment securities in fiscal 2009 and fiscal 2010. Further decreases in the value of stocks may cause additional losses due to decreases in the valuation of investment securities, thereby adversely affecting Panasonic’s operating results and financial condition. The decrease in the value of Japanese stocks may also reduce stockholders’ equity on the balance sheet, as unrealized holding gains (losses) of available-for-sale securities are included as part of accumulated other comprehensive income (loss).

Competition in the industry may adversely affect Panasonic’s ability to maintain profitability

Panasonic develops, produces and sells a broad range of products and therefore faces many different types of competitors, from large international companies to relatively small, rapidly growing, and highly specialized organizations. Panasonic may choose not to fund or invest in one or more of its businesses to the same degree as its competitors in those businesses do, or it may not be able to do so in a timely manner or even at all. These competitors may have greater financial, technological, and marketing resources than Panasonic in the respective businesses in which they compete.

Rapid declines in product prices may adversely affect Panasonic’s financial condition

Panasonic’s business is subject to intense price competition worldwide, which makes it difficult for Panasonic to determine product prices and maintain adequate profits. Such intensified price competition may adversely affect Panasonic’s profits, especially in terms of possible decreases in demand. Amid accelerating changes in the structure of markets, such as a demand shift to emerging markets and lower-priced products, and market expansion of environmental and energy-related businesses, Panasonic’s product prices in digital electronics and many other business areas may continue to decline significantly.

Panasonic’s business is, and will continue to be, subject to risks generally associated with international business operations

One of Panasonic’s business strategies is business expansion in overseas markets. In many of these markets, Panasonic may face risks generally associated with international manufacturing and other business operations, such as political instability, including terrorist attacks and abduction, cultural and religious differences and labor relations, as well as economic uncertainty and foreign currency exchange risks. Panasonic may also face barriers in commercial and business customs in foreign countries, including difficulties in timely collection of accounts receivable or in building and expanding relationships with customers, subcontractors or parts suppliers. Panasonic may also experience various political, legal or other restrictions in investment, trade, manufacturing, labor or other aspects of operations, including restrictions on foreign investment or the repatriation of profits on invested capital, nationalization of local industry, changes in export or import restrictions or foreign exchange controls, and changes in the tax system or the rate of taxation in countries where Panasonic operates businesses. With respect to products exported overseas, tariffs, other barriers or shipping costs may make Panasonic’s products less competitive in terms of price. Expanding its overseas business may require significant investments long before Panasonic realizes returns on such investments, and increased investments may result in expenses growing at a faster rate than revenues.

Panasonic may not be able to keep pace with technological changes and develop new products or services in a timely manner to remain competitive

Panasonic may fail to introduce new products or services in response to technological changes in a timely manner. Some of Panasonic’s core businesses, such as consumer digital electronics and key components and devices, are concentrated in industries where technological innovation is the central competitive factor.

 

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Panasonic continuously faces the challenge of developing and introducing viable and innovative new products. Panasonic must predict with reasonable accuracy both future demand and new technologies that will be available to meet such demand. If Panasonic fails to do so, it will not be able to compete effectively in new markets.

Panasonic may not be able to develop product formats that can prevail as de facto standards

Panasonic has been forming alliances and partnerships with other major manufacturers to strengthen technologies and the development of product formats, such as next-generation home and mobile networking products, data storage devices, and software systems. Despite these efforts, Panasonic’s competitors may succeed in developing de facto standards for future products before Panasonic can. In such cases, Panasonic’s competitive position, business, operating results and financial condition could be adversely affected.

Panasonic may not be able to successfully recruit and retain skilled employees, particularly scientific, technical and management professionals

Panasonic’s future success depends largely on its ability to attract and retain certain key personnel, including scientific, technical and management professionals. Industry demand for skilled employees, however, exceeds the number of personnel available, and the competition for attracting and retaining these employees is intense. Because of this intense competition for skilled employees, Panasonic may be unable to retain its existing personnel or attract additional qualified employees to keep up with future business needs. If this should happen, Panasonic’s business, operating results and financial condition could be adversely affected.

Alliances with, and strategic investments in, third parties, and mergers and acquisitions undertaken by Panasonic, may not produce positive or expected results

Panasonic develops its businesses by forming alliances or joint ventures with, and making strategic investments in, other companies, including investments in start-up companies. Furthermore, the strategic importance of partnering with third parties is increasing. In some cases, such partnerships are crucial to Panasonic’s goal of introducing new products and services, but Panasonic may not be able to successfully collaborate or achieve expected synergies with its partners. Furthermore, Panasonic does not control these partners, who may make decisions regarding their business undertakings with Panasonic that may be contrary to Panasonic’s interests. In addition, if these partners change their business strategies, Panasonic may fail to maintain these partnerships.

Panasonic is dependent on the ability of third parties to deliver parts, components and services in adequate quality and quantity in a timely manner, and at a reasonable price

Panasonic’s manufacturing operations depend on obtaining raw materials, parts and components, equipment and other supplies including services from reliable suppliers at adequate quality and quantity in a timely manner. It may be difficult for Panasonic to substitute one supplier for another, increase the number of suppliers or change one component for another in a timely manner or at all due to the interruption of supply caused by, among other conditions, the bankruptcy of suppliers or increased industry demand. This may adversely affect Panasonic’s operations. Although Panasonic decides purchase prices by contract, the prices of raw materials, including iron and steel, resin, and non-ferrous metals, and parts and components, may increase due to changes in supply and demand and the inflow of investment funds. Some components are only available from a limited number of suppliers, which also may adversely affect Panasonic’s business, operating results and financial condition.

Panasonic is exposed to the risk that its customers may encounter financial difficulties

Many of Panasonic’s customers purchase products and services from Panasonic on payment terms that do not provide for immediate payment. If customers from whom Panasonic has substantial accounts receivable encounter financial difficulties and are unable to make payments on time, Panasonic’s business, operating results and financial condition could be adversely affected.

 

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Panasonic may not be able to achieve all the targets of its midterm management plan

Panasonic is implementing a midterm management plan called “Green Transformation 2012” (“GT12”), announced on May 7, 2010, which runs from fiscal 2011 to fiscal 2013. Under this plan, Panasonic aims to achieve an operating profit* to sales ratio of 5% or more, sales of 10 trillion yen, ROE of 10% and CO2 emission reductions of 50 million tons (compared to the estimated amount of emission in fiscal 2013 assuming that no remedial measures were taken since fiscal 2006). However, Panasonic may not be successful in achieving all the targets or in realizing the expected benefits because of various external and internal factors including deterioration of the business environment and increased costs of business restructuring such as additional business reorganization, the impairment of fixed assets and employment adjustment in order to cope with the business environment.

* In order to be consistent with generally accepted financial reporting practices in Japan, operating profit, a non-GAAP measure, is presented as net sales less cost of sales and selling, general and administrative expenses. Panasonic believes that this is useful to investors in comparing Panasonic’s financial results with those of other Japanese companies.

Panasonic may be subject to product liability or warranty claims that could result in significant direct or indirect costs

The occurrence of quality problems due to product defects, including safety incidents, in Panasonic products could make Panasonic liable for damages not covered by product and completed operation liability insurance, whereby Panasonic could incur significant expenses. Due to negative publicity concerning these problems, Panasonic’s business, operating results and financial condition may be adversely affected.

Panasonic may fail to protect its proprietary intellectual properties, or face claims of intellectual property infringement by a third party, and may lose its intellectual property rights on key technologies or be liable for significant damages

Panasonic’s success depends on its ability to obtain intellectual property rights covering its products and product design. Patents may not be granted or may not be of sufficient scope or force to provide Panasonic with adequate protection or commercial advantage. In addition, effective copyright and trade secret protections may be unavailable or limited in some countries in which Panasonic operates. Competitors or other third parties may also develop technologies that are protected by patents and other intellectual property rights, which make such technologies unavailable or available only on terms unfavorable to Panasonic. Panasonic obtains licenses for intellectual property rights from other parties; however, such licenses may not be available at all or on acceptable terms in the future. Litigation may also be necessary to enforce Panasonic’s intellectual property rights or to defend against intellectual property infringement claims brought against Panasonic by third parties. In such cases, Panasonic may incur significant expenses for such lawsuits. Furthermore, Panasonic may be prohibited from using certain important technologies or liable for damages in cases of admitted violations of intellectual property rights of others.

Changes in accounting standards and tax systems may adversely affect Panasonic’s financial results and condition

Introduction of new accounting standards or tax systems, or changes thereof, which Panasonic cannot predict, may have a material adverse effect on Panasonic’s operating results and financial condition. In addition, if tax authorities have different opinions from Panasonic on Panasonic’s tax declarations, Panasonic may need to make larger tax payments than estimated.

Payments or compensation related to environmental regulations or issues may adversely affect Panasonic’s business, operating results and financial condition

Panasonic is subject to environmental regulations such as those relating to climate change, air pollution, water pollution, elimination of hazardous substances, waste management, product recycling, and soil and

 

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groundwater contamination, and may be held responsible for certain related payments or compensation. Furthermore, if these regulations become stricter and an additional duty of eliminating the use of environmentally hazardous materials is imposed, or if Panasonic determines that it is necessary and appropriate, from the viewpoint of corporate social responsibility, to respond to environmental issues, the payment of penalties for the violation of these regulations or voluntary payment of compensation for consolation to parties affected by such issues may adversely affect Panasonic’s business, operating results and financial condition.

Leaks of confidential information or trade secrets may adversely affect Panasonic’s business

In the normal course of business, Panasonic holds confidential information mainly about customers regarding credit worthiness and other information, as well as confidential information about companies and other third parties. Such information may be leaked due to an accident or other inevitable cause, and any material leakage of confidential information may result in significant expense for related lawsuits and adversely affect Panasonic’s business and image. Moreover, besides customer information, there is a risk that Panasonic’s trade secrets, such as technology information, may be leaked by illegal conduct or by mere negligence of external parties, etc. If such is the case, Panasonic’s business, operating results and financial condition may be adversely affected.

Governmental laws and regulations may limit Panasonic’s activities, increase its operating costs or subject it to sanctions and lawsuits

Panasonic is subject to governmental regulations in Japan and other countries in which it conducts its business, including governmental approvals required for conducting business and investments, laws and regulations governing the telecommunications businesses and electric product safety, national security-related laws and regulations and export/import laws and regulations, as well as commercial, antitrust, patent, product liability, environmental laws and regulations, consumer protection, financial and business taxation laws and regulations, and internal control regulations due to the implementation of stricter laws and regulations and stricter interpretations. However, to the extent that Panasonic cannot comply with these laws and regulations from technical and economic perspectives, or if they become stricter and Panasonic determines that it would not be economical to continue to comply with them, Panasonic would need to limit its activities in the affected business areas. These laws and regulations could increase Panasonic’s operating costs. In addition, in the event that governmental authorities find or determine that Panasonic has violated these laws and regulations, Panasonic could become subject to regulatory sanctions, including money penalties, or criminal sanctions or civil lawsuits for damages, and could also suffer reputational harm.

Panasonic’s facilities and information systems could be damaged as a result of disasters or unpredictable events, which could have an adverse effect on its business operations

Panasonic’s headquarters and major facilities including manufacturing plants, sales offices and research and development centers are located in Japan. Panasonic also operates procurement, manufacturing, logistics, sales and research and development facilities all over the world. If major disasters, such as earthquakes, fires, floods, including those caused by climate change, wars, terrorist attacks, computer viruses or other events occur, or Panasonic’s information system or communications network breaks down or operates improperly as a result of such events, Panasonic’s facilities may be seriously damaged, or Panasonic may have to stop or delay production and shipment. Panasonic may incur expenses relating to such damages. In addition, if an infectious disease, such as a new highly-pathogenic flu strain, becomes prevalent throughout the world, Panasonic’s manufacturing and sales may be materially disrupted.

External economic conditions may adversely affect Panasonic’s pension plans

Panasonic has contributory, funded benefit pension plans covering substantially all employees in Japan who meet eligibility requirements. A decline in interest rates may cause a decrease in the discount rate on benefit obligations. A decrease in the value of stocks may also affect the return on plan assets. As a result, the actuarial loss may increase, leading to an increase in future net periodic benefit costs of these pension plans.

 

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Some long-lived assets may not produce adequate returns

Panasonic has many long-lived assets, such as plant, property and equipment, and goodwill, that generate returns. Panasonic periodically reviews the recorded value of its long-lived assets to determine if the fair value will be sufficient to support the remaining recorded asset values. If these long-lived assets do not generate sufficient cash flows, impairment losses will have to be recognized, adversely affecting Panasonic’s results of operations and financial condition.

Realizability of deferred tax assets and uncertain tax positions may increase Panasonic’s provision for income tax

In assessing the realizability of deferred tax assets and uncertain tax positions based on the expected future generation of taxable income or assessed sustainability of uncertain tax positions, Panasonic considers whether it is more likely than not that any portion or all of the deferred tax assets or recognized tax position benefit will not be realized. If Panasonic determines that temporary differences and loss carryforwards or recognized tax benefits cannot be realized upon the generation of future taxable income during the deductible periods due to deteriorating business conditions or tax position benefits may not be realized upon settlement, valuation allowance against deferred tax assets or unrecognized tax benefit reserves could be recognized and Panasonic’s provision for income tax may increase.

Financial results and condition of associated companies may adversely affect Panasonic’s operating results and financial condition

Panasonic holds equities of several associated companies. Panasonic can exercise influence over operating and financing policies of these companies. However, Panasonic does not have the right to make decisions for them since the companies operate independently. Some companies may record losses. If these associated companies do not generate profits, Panasonic’s business results and financial condition may be adversely affected.

Risks Relating to Owning Panasonic’s Common Stock and ADSs

Panasonic’s shareholders of record on a record date may not receive the dividend they anticipate

The customary dividend payout practice and relevant regulatory regime of publicly listed companies in Japan may differ from that followed in foreign markets. Panasonic’s dividend payout practice is no exception. While Panasonic regularly announces forecasts of annual and interim dividends in April or May of each year, these forecasts are not legally binding. The payment of annual or interim dividends requires a resolution of its board of directors. If the board adopts such a resolution, the dividend payment is made to shareholders as of the applicable record date, which is currently specified by its Articles of Incorporation as March 31, in the case of annual dividends, and September 30, in the case of interim dividends. However, the board usually does not adopt a resolution with respect to an annual dividend until after March 31 or with respect to an interim dividend until after September 30, respectively. Shareholders of record as of an applicable record date may sell shares in the market after the record date in anticipation of receiving a certain dividend payment based on the previously announced forecasts. However, since these forecasts are not legally binding and resolutions to pay dividends are usually not adopted until after the record date, Panasonic’s shareholders of record on record dates for annual or interim dividends may not receive the dividend they anticipate.

Investors holding less than a unit of shares will have limited rights as shareholders

Pursuant to the Company Law and other related legislation, Panasonic’s Articles of Incorporation provide that 100 shares of common stock constitute one “unit.” The Company Law imposes significant restrictions and limitations on holdings of shares that do not constitute whole units. In general, holders of shares constituting less than one unit do not have the right to vote or to examine Panasonic’s books and records. The transferability of

 

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shares of Panasonic’s common stock constituting less than one unit is significantly limited. For a more complete description of the unit share system and its effect on the rights of holders of Panasonic shares, see “Description of Panasonic’s Common Stock—Unit Share System.”

Rights of shareholders under Japanese law may be more limited than under the laws of other jurisdictions

Panasonic’s Articles of Incorporation, Regulations of the Board of Directors, and the Company Law govern the corporate affairs of Panasonic. Legal principles relating to such matters as the validity of corporate procedures, directors’ fiduciary duties and liabilities, and shareholders’ rights may be different from those that would apply to a non-Japanese company. Shareholders’ rights under Japanese law may not be as extensive as shareholders’ rights under the laws of other countries or jurisdictions within the United States. You may have more difficulty in asserting your rights as a shareholder than you would as a shareholder of a corporation organized in another jurisdiction.

Because of daily price range limitations under Japanese stock exchange rules, you may not be able to sell your shares of Panasonic’s common stock at a particular price on any particular trading day, or at all

Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchanges are order-driven markets without specialists or market makers to guide price formation. To prevent excessive volatility, these exchanges set daily upward and downward price fluctuation limits for each stock, based on the previous day’s closing price. Although transactions may continue at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions may take place outside these limits. Consequently, an investor wishing to sell at a price above or below the relevant daily limit may not be able to sell his or her shares at such price on a particular trading day, or at all.

It may not be possible for investors to effect service of process within the United States upon Panasonic or its directors, executive officers or corporate auditors, or to enforce against Panasonic or those persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States

Panasonic is a joint stock corporation organized under the laws of Japan. Almost all of Panasonic’s directors, executive officers and corporate auditors reside outside the United States. Many of Panasonic’s assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon Panasonic or these persons or to enforce against Panasonic or these persons judgments obtained in the U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States. Panasonic believes that there is doubt as to the enforceability in Japan, in original actions or in actions to enforce judgments of U.S. courts, of liabilities predicated solely upon the federal securities laws of the United States.

ADS holders must act through the depositary to exercise these rights and have fewer rights than shareholders

The rights of shareholders under Japanese law to take actions, including exercising their voting rights, receiving dividends and distributions, bringing derivative actions, examining Panasonic’s accounting books and records, and exercising appraisal rights, are available only to shareholders of record. Because the depositary, through its nominee, is the record holder of the shares underlying the ADSs, only the depositary can exercise those rights in connection with deposited shares. If shareholders choose to deposit shares allocated to them in the Share Exchange for ADS, the depositary will make efforts to exercise their voting rights underlying ADSs in accordance with the instructions of ADS holders, and will pay dividends and distributions collected from Panasonic. However, ADS holders will not be able to bring a derivative action, examine Panasonic’s accounting books and records, or exercise appraisal rights through the depositary.

 

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SELECTED CONSOLIDATED FINANCIAL DATA OF PANASONIC

U.S. GAAP Selected Financial Data of Panasonic

The following selected consolidated statement of operations data for the years ended March 31, 2008, 2009 and 2010, and the selected consolidated balance sheet data as of March 31, 2009 and 2010, have been derived from Panasonic’s audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of operations data for the years ended March 31, 2006 and 2007, and the selected consolidated balance sheet data as of March 31, 2006, 2007 and 2008 have been derived from Panasonic’s audited consolidated financial statements not included in this prospectus. The selected consolidated statement of operations data for the six months ended September 30, 2009 and 2010, and the selected consolidated balance sheet data as of September 30, 2010 have been derived from Panasonic’s unaudited consolidated financial statements included elsewhere in this prospectus. The selected consolidated balance sheet data as of September 30, 2009 have been derived from Panasonic’s unaudited consolidated financial statements not included in this prospectus. You should read the following selected consolidated financial data in conjunction with Panasonic’s consolidated financial statements and the information in “Panasonic Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus. Panasonic has prepared its consolidated financial statements in accordance with U.S. GAAP.

 

    Yen (billions), except per share amounts  
    Fiscal year ended March 31,     Six months ended
September 30,
 
    2010     2009     2008     2007     2006     2010     2009  

Statements of Operations Data:

             

Net sales

    7,418        7,766        9,069        9,108        8,894        4,368        3,333   

Income (loss) before income taxes

    (29     (383     435        439        371        145        (26

Net income (loss)

    (171     (404     311        248        153        84        (51

Net income (loss) attributable to Panasonic Corporation

    (103     (379     282        217        154        75        (47

Per common share:

             

Net income (loss) attributable to Panasonic Corporation:

             

Basic

    (49.97     (182.25     132.90        99.50        69.48        36.09        (22.63

Diluted

    —          (182.25     132.90        99.50        69.48        —          —     

Dividends

    12.50        40.00        32.50        25.00        17.50        5.00        5.00   
    ($0.13     ($0.40     ($0.33     ($0.21     ($0.15     ($0.06     ($0.06

Balance Sheet Data:

             

Total assets

    8,358        6,403        7,444        7,897        7,965        8,964        6,809   

Long-term debt

    1,029        651        232        227        264        950        682   

Total Panasonic Corporation shareholders’ equity

    2,792        2,784        3,742        3,917        3,788        2,652        2,701   

Common stock

    259        259        259        259        259        259        259   

Number of shares issued at year-end (thousands)

    2,453,053        2,453,053        2,453,053        2,453,053        2,453,053        2,453,053        2,453,053   

Number of shares issued and outstanding at year-end (thousands)

    2,070,605        2,070,642        2,101,117        2,146,284        2,209,532        2,070,330        2,070,622   

 

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Notes:

 

1. Dividends per share reflect those paid during each fiscal year.
2. United States dollar amounts for dividends per share are translated from yen for convenience at the year-end exchange rate of each period.
3. Panasonic adopted the provisions of ASC 810, “Consolidation” and the presentations requirements for the financial statements have been adopted retrospectively and prior year amounts of net income (loss) have been reclassified to conform to the presentation used for fiscal 2010.
4. Diluted net income (loss), attributable to Panasonic Corporation common shareholders per share for fiscal 2010, and for the six months ended September 30, 2009 and 2010 have been omitted because Panasonic did not have potential common shares that were outstanding for these periods.

 

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SELECTED CONSOLIDATED FINANCIAL DATA OF SANYO

U.S. GAAP Selected Financial Data of SANYO

The following selected consolidated statement of operations data for the years ended March 31, 2009 and 2010, and the selected consolidated balance sheet data as of March 31, 2009 and 2010, have been derived from SANYO’s audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of operations data for the years ended March 31, 2006, 2007 and 2008 and the selected consolidated balance sheet data as of March 31, 2006, 2007 and 2008 have been derived from SANYO’s audited consolidated financial statements not included in this prospectus. The selected consolidated statement of operations data for the six months ended September 30, 2009 and 2010, and the selected consolidated balance sheet data as of September 30, 2010 have been derived from SANYO’s unaudited consolidated financial statements included elsewhere in this prospectus. The selected consolidated balance sheet data as of September 30, 2009 have been derived from SANYO’s unaudited consolidated financial statements not included in this prospectus. You should read the following selected consolidated financial data in conjunction with SANYO’s consolidated financial statements and the information in “SANYO Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus. SANYO has prepared its consolidated financial statements in accordance with U.S. GAAP.

 

    Yen (billions), except per share amounts  
    Fiscal year ended March 31,     For the six months ended
September 30,
 
    2010     2009     2008     2007     2006     2010     2009  

Statements of Operations Data:

             

Net sales*

    1,494        1,647        1,853        N/A        N/A        748        734   

Income (loss) from continuing operations before income taxes*

    (29     (27     59        N/A        N/A        19        (29

Income (loss) from continuing operations*

    (41     (32     44        N/A        N/A        11        (36

Net income (loss) attributable to SANYO

    (49     (93     29        (45     (206     12        (37

Per common share:

             

Net income (loss) attributable to SANYO:

             

Basic

    (7.94     (15.18     4.67        (72.66     (194.96     1.88        (6.08

Diluted

    —          (15.18     4.67        (72.66     (194.96     —          —     

Dividends

    —          —          —          —          —          —          —     

Balance Sheet Data:

             

Total assets

    1,391        1,345        1,684        1,971        2,155        1,305        1,394   

Long-term debt

    324        305        271        335        494        260        435   

Total SANYO stockholders’ equity

    108        146        308        312        403        105        112   

Common stock

    322        172        172        172        172        322        209   

Preferred stock

    —          150        150        150        89        —          113   

Number of shares issued at year-end (thousands)

             

Common stock

    6,158,053        1,872,338        1,872,338        1,872,338        1,872,338        6,158,053        2,937,562   

Preferred stock

    —          428,572        428,572        428,572        428,572        —          428,572   

Number of shares issued and outstanding at year-end (thousands)

             

Common stock

    6,141,397        1,855,811        1,853,108        1,853,502        1,854,464        6,141,225        2,920,919   

Preferred stock

    —          428,572        428,572        428,572        428,572        —          322,049   

 

*Note: Operational results of the semiconductor business classified as discontinued operations for the earliest two years of the five-year period have not been reclassified due to the unreasonable effort and expense necessary to disclose such information.

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial statements have been prepared on a U.S. GAAP basis and give effect to the acquisition of all outstanding shares of SANYO through the tender offer and Share Exchange. These unaudited pro forma condensed consolidated financial statements are based on the acquisition method of accounting, after giving effect to the pro forma adjustments described in the accompanying notes. These unaudited pro forma condensed consolidated financial statements are also based on and derived from the historical U.S. GAAP consolidated financial statements of Panasonic, together with the related notes, which are included in this prospectus.

These unaudited pro forma condensed consolidated financial statements should be read in conjunction with (1) the historical U.S. GAAP consolidated financial statements, together with the related notes, of Panasonic included in this prospectus, and (2) the selected U.S. GAAP consolidated financial data of Panasonic included in this prospectus.

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2010 gives effect to the tender offer and Share Exchange as if they had occurred on September 30, 2010. The unaudited pro forma condensed consolidated statement of operations gives effect to the tender offer and Share Exchange as if they had occurred at the beginning of the year ended March 31, 2010. In addition, the unaudited pro forma condensed consolidated financial statements give effect to the original acquisition of 50.2% voting rights and controlling interest in SANYO on December 21, 2009 as if the acquisition had occurred at the beginning of the year ended March 31, 2010.

The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only. This information is not necessarily indicative of the operating results or financial position that might have occurred had the tender offer and Share Exchange occurred on the dates indicated, nor is it necessarily indicative of future operating results or financial position of Panasonic.

As a result of the tender offer and Share Exchange, Panasonic and SANYO will incur transaction costs, currently estimated at approximately 1,800 million yen in the aggregate, in connection with completing the transaction. These transaction costs are currently expected to consist principally of costs associated with issuance of new shares, as well as legal and accounting fees.

The unaudited pro forma condensed consolidated financial statements do not reflect the transaction costs described above or any additional unanticipated transaction costs to be incurred through the date of the tender offer and Share Exchange or thereafter, nor do they reflect any anticipated synergies or cost savings.

 

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PANASONIC CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2010

 

     (yen in millions)  
      Historical     Pro Forma
adjustments-
tender offer
(Note 2a)
    Sub-total     Pro Forma
adjustments-
Share
Exchange
(Note 2b)
     Pro Forma  

Assets

                               

Current assets:

           

Cash and cash equivalents

     1,868,406        (261,023     1,607,383           1,607,383   

Time deposits

     102,076          102,076           102,076   

Trade receivables:

           

Related companies

     45,644          45,644           45,644   

Notes

     77,308          77,308           77,308   

Accounts

     1,057,328          1,057,328           1,057,328   

Allowance for doubtful receivables

     (22,906       (22,906        (22,906
                                         

Net trade receivables

     1,157,374          1,157,374           1,157,374   
                                         

Inventories

     1,010,673          1,010,673           1,010,673   

Other current assets

     459,005          459,005           459,005   
                                         

Total current assets

     4,597,534        (261,023     4,336,511           4,336,511   
                                         

Investments and advances:

           

Associated companies

     154,387          154,387           154,387   

Other investments and advances

     379,182          379,182           379,182   
                                         

Total investments and advances

     533,569          533,569           533,569   
                                         

Property, plant and equipment:

           

Land

     385,279          385,279           385,279   

Buildings

     1,757,887          1,757,887           1,757,887   

Machinery and equipment

     2,234,098          2,234,098           2,234,098   

Construction in progress

     125,708          125,708           125,708   
                                         
     4,502,972          4,502,972           4,502,972   

Less accumulated depreciation

     2,590,061          2,590,061           2,590,061   
                                         

Net property, plant and equipment

     1,912,911          1,912,911           1,912,911   
                                         

Other assets:

           

Goodwill

     920,312          920,312           920,312   

Intangible assets

     576,481          576,481           576,481   

Other assets

     423,159          423,159           423,159   
                                         

Total other assets

     1,919,952          1,919,952           1,919,952   
                                         
     8,963,966        (261,023     8,702,943           8,702,943   
                                         

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

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PANASONIC CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2010—(CONTINUED)

 

     (yen in millions)  
      Historical     Pro Forma
adjustments-
tender offer
(Note 2a)
    Sub-total     Pro Forma
adjustments-
Share Exchange
(Note 2b)
    Pro Forma  

Liabilities and Equity

                              

Current liabilities:

          

Short-term debt, including current portion of long-term debt

     1,113,805          1,113,805          1,113,805   

Trade payables:

          

Related companies

     97,049          97,049          97,049   

Notes

     57,398          57,398          57,398   

Accounts

     934,239          934,239          934,239   
                                        

Total trade payables

     1,088,686          1,088,686          1,088,686   
                                        

Accrued income taxes

     59,446          59,446          59,446   

Accrued payroll

     159,753          159,753          159,753   

Other accrued expenses

     818,935          818,935          818,935   

Deposits and advances from customers

     67,729          67,729          67,729   

Employees’ deposits

     9,704          9,704          9,704   

Other current liabilities

     362,201          362,201          362,201   
                                        

Total current liabilities

     3,680,259          3,680,259          3,680,259   
                                        

Noncurrent liabilities:

          

Long-term debt

     950,131          950,131          950,131   

Retirement and severance benefits

     415,931          415,931          415,931   

Other liabilities

     379,800          379,800          379,800   
                                        

Total noncurrent liabilities

     1,745,862          1,745,862          1,745,862   
                                        

Equity:

          

Panasonic Corporation shareholder’s equity:

          

Common stock

     258,740          258,740          258,740   

Capital surplus

     1,126,269        50,305        1,176,574        29,301        1,205,875   

Legal reserve

     93,949          93,949          93,949   

Retained earnings

     2,413,210          2,413,210        (72,384     2,340,826   

Accumulated other comprehensive income (loss):

          

Cumulative translation adjustments

     (445,087     (4,929     (450,016     (3,041     (453,057

Unrealized holding gains (losses) of available-for-sale securities

     10,353        (26     10,327        (17     10,310   

Unrealized gains (losses) of derivative instruments

     1,728          1,728          1,728   

Pension liability adjustments

     (136,507     (491     (136,998     (303     (137,301
                                        

Total accumulated other comprehensive income (loss)

     (569,513     (5,446     (574,959     (3,361     (578,320
                                        

Treasury stock, at cost

     (670,695       (670,695     235,328        (435,367
                                        

Total Panasonic Corporation shareholders’ equity

     2,651,960        44,859        2,696,819        188,884        2,885,703   
                                        

Noncontrolling interests

     885,885        (305,882     580,003        (188,884     391,119   
                                        

Total equity

     3,537,845        (261,023     3,276,822        —          3,276,822   
                                        

Commitments and contingent liabilities

          
                                        
     8,963,966        (261,023     8,702,943        —          8,702,943   
                                        

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

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PANASONIC CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2010

 

    (yen in millions, except per share data)  
     Historical     Pro Forma
adjustments-
tender offer

(Note 3b)
    Sub-total     Pro Forma
adjustments-
Share
Exchange

(Note 3c)
    Pro Forma  

Revenues, costs and expenses:

         

Net sales:

         

Related companies

    114,544          114,544          114,544   

Other

    4,253,404          4,253,404          4,253,404   
                                       

Total net sales

    4,367,948          4,367,948          4,367,948   

Cost of sales

    (3,199,550       (3,199,550       (3,199,550

Selling, general and administrative expenses

    (999,430       (999,430       (999,430

Interest income

    5,717          5,717          5,717   

Dividends received

    3,483          3,483          3,483   

Other income

    30,260          30,260          30,260   

Interest expenses

    (14,285       (14,285       (14,285

Other deductions

    (49,590       (49,590       (49,590
                                       

Income before income taxes

    144,553          144,553          144,553   

Provision for income taxes:

         

Current

    65,631          65,631          65,631   

Deferred

    (1,484       (1,484       (1,484
                                       
    64,147          64,147          64,147   

Equity in earnings of associated companies

    3,629          3,629          3,629   
                                       

Net income

    84,035          84,035          84,035   

Less net income attributable to noncontrolling interests

    9,317        188        9,505        116        9,621   
                                       

Net income attributable to Panasonic Corporation

    74,718        (188     74,530        (116     74,414   
                                       

Net income per share attributable to Panasonic Corporation common shareholders:

         

Basic

    36.09        (0.09     36.00        (2.25     33.75   

Diluted

    —            —            —     

Weighted average number of common shares (Note 3d):

         

Basic

    2,070,372,312          2,070,372,312        134,256,345        2,204,628,657   

Diluted

    —            —            —     

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

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PANASONIC CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED MARCH 31, 2010

 

    (yen in millions, except per share data)  
    Historical     Pro Forma
adjustments-
SANYO
acquisition

(Note 3a)
    Pro Forma
adjustments-
tender offer

(Note 3b)
    Sub-total     Pro Forma
adjustments-
Share
Exchange

(Note 3c)
    Pro Forma  

Revenues, costs and expenses:

           

Net sales:

           

Related companies

    209,938        40,060          249,998          249,998   

Other

    7,208,042        1,159,360          8,367,402          8,367,402   
                                               

Total net sales

    7,417,980        1,199,420          8,617,400          8,617,400   

Cost of sales

    (5,341,059     (1,001,361       (6,342,420       (6,342,420

Selling, general and administrative expenses

    (1,886,468     (208,539       (2,095,007       (2,095,007

Interest income

    12,348        1,425          13,773          13,773   

Dividends received

    6,746        289          7,035          7,035   

Other income

    47,896        11,705          59,601          59,601   

Interest expenses

    (25,718     (7,925       (33,643       (33,643

Other deductions

    (261,040     (59,682       (320,722       (320,722
                                               

Income loss before income taxes

    (29,315     (64,668       (93,983       (93,983

Provision for income taxes:

           

Current

    58,147        9,523          67,670          67,670   

Deferred

    83,686        (15,093       68,593          68,593   
                                               
    141,833        (5,570       136,263          136,263   

Equity in earnings of associated companies

    481        748          1,229          1,229   
                                               

Net income (loss)

    (170,667     (58,350       (229,017       (229,017

Less net income (loss) attributable to noncontrolling interests

    (67,202     (28,803     22,221        (73,784     13,707        (60,077
                                               

Net income (loss) attributable to Panasonic Corporation

    (103,465     (29,547     (22,221     (155,233     (13,707     (168,940
                                               

Net income per share attributable to Panasonic Corporation common shareholders:

           

Basic

    (49.97     (14.27     (10.73     (74.97     (1.65     (76.62

Diluted

    —              —            —     

Weighted average number of common shares (Note 3d):

           

Basic

    2,070,623,618            2,070,623,618        134,256,345        2,204,879,963   

Diluted

    —              —            —     

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

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PANASONIC CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Exchange Ratios and Pro Forma Earnings Per Share

Under the Share Exchange Agreement, 0.115 shares of Panasonic common stock will be delivered in exchange for one share of SANYO common stock. This Share Exchange ratio was used in computing the share and per share amounts in the accompanying unaudited pro forma condensed consolidated financial statements.

The pro forma condensed combined basic and diluted earnings (loss) per share for the respective periods presented are based on the combined weighted average number of common and dilutive potential common shares and adjusted weighted average shares of SANYO. The number of weighted average shares and adjusted weighted average shares, including all dilutive potential common shares, reflects the reclassification of SANYO’ common stocks at the exchange ratio discussed above.

Note 2 Pro Forma Balance Sheet Adjustments:

 

  (a) Pro forma adjustments reflect the decrease in cash and changes in noncontrolling interests, capital surplus and accumulated other comprehensive income (loss) due to the acquisition of additional shares through the tender offer. Specifically, the nature and purpose of each pro forma adjustment by balance sheet caption are described as follows:

Cash and cash equivalents (261,023 million yen): Decrease in Cash and cash equivalents is due to cash paid to the SANYO shareholders as consideration for the tender offer. This amount is calculated by multiplying the number of shares purchased through the tender offer and the tender offer price per share.

Capital surplus (50,305 million yen) and Accumulated other comprehensive income (loss) (5,446 million yen): Decrease in Accumulated other comprehensive income (loss), a component of noncontrolling interests as described below, is calculated by multiplying the change in SANYO’s Accumulated other comprehensive income (loss) since the date of Panasonic gaining controlling interest in SANYO through the date of the tender offer by the number of shares acquired in the tender offer. Increase in Capital surplus represents the difference between cash paid for the SANYO shares in the tender offer and the acquisition of noncontrolling interest less the change in Accumulated other comprehensive income (loss) as described above. These reflect the additional equity acquired by Panasonic with the increase in equity ownership in SANYO from 50.2% to 81%.

Noncontrolling interests (305,882 million yen): Decrease due to the acquisition of additional voting rights in SANYO as the result of the tender offer. This amount is calculated by multiplying SANYO’s noncontrolling interests balance by the number of voting rights acquired through the tender offer.

 

  (b) Pro forma adjustments reflect the decrease in treasury stock and changes in noncontrolling interests, capital surplus, retained earnings and accumulated other comprehensive income (loss) as a result of the Share Exchange. Specifically, the nature of each pro forma adjustment by balance sheet caption are described as follows:

Capital surplus (29,301 million yen) and Accumulated other comprehensive income (loss) (3,361 million yen): Decrease in Accumulated other comprehensive income (loss), a component of noncontrolling interests as described below, is calculated by multiplying the change in SANYO’s Accumulated other comprehensive income (loss) since the date of Panasonic gaining a controlling interest in SANYO through the date of the share exchange by the number of shares acquired in the share exchange. Increase in Capital surplus represents the difference between the fair value of Panasonic treasury stock and cost of the treasury stock that were issued to the SANYO shareholders as consideration for the share exchange and the acquisition of noncontrolling interest less the change in Accumulated other comprehensive income (loss) as described above. These reflect the additional equity acquired by Panasonic with the increase in equity ownership in SANYO from 81% to 100%.

 

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Retained earnings (72,384 million yen) and Treasury stock, at cost (235,328 million yen): This reflects the issuance of Panasonic’s treasury stock as a consideration for the acquisition of SANYO shares in conjunction with the share exchange. The difference between the fair value and cost of the treasury stock is offset against capital surplus with any excess losses beyond the capital surplus balance for the treasury stock charged to retained earnings.

Noncontrolling interests (188,884 million yen): Decrease is due to the acquisition of additional voting rights in SANYO as the result of the share exchange. This amount is calculated by multiplying SANYO’s noncontrolling interests balance by the number of shares acquired through the share exchange.

Note 3 Pro Forma Statement of Operations Adjustments:

 

  (a) The information in the statement of operations for the year ended March 31, 2010 has factored in the assumption that the acquisition of controlling interest in SANYO on December 21, 2009 had occurred on April 1, 2009. The significant component of the adjustments related to the inclusion of SANYO’s operations from April 1, 2009 through the date of acquisition of controlling interests (after the elimination of the transactions with the Panasonic group) to reflect the impact of SANYO’s operations to Panasonic’s condensed consolidated statement of operations.

In addition, the following adjustments related to SANYO’s purchase price adjustments to fair value were made to take into consideration additional impact to Panasonic’s condensed consolidated statement of operations:

 

   

Adjustments to depreciation expenses related to SANYO’s plant and equipment. As a result of this adjustment, cost of sales increased by 711 million.

 

   

Adjustments of amortization expenses related to SANYO’s intangible assets such as patents, trademarks, and customer relationships. As a result of this adjustment, cost of sales and selling, general and administrative expenses increased by 28,249 million yen and 6,732 million yen, respectively.

 

   

Adjustments of amortization expenses related to actuarial difference and obligations for past service costs realized due to purchase price adjustments recorded on SANYO’s pension liabilities. As a result of this adjustment, cost of sales and selling, general and administrative expenses decreased by 1,872 million yen and 3,417 million yen, respectively.

 

  (b) Adjustments related to profit attributable to noncontrolling interests due to the increase in equity ownership from 50.2% to 81% through the tender offer. This is calculated by multiplying SANYO’s net loss for the period and the decrease in noncontrolling interests of 30.8%.

 

  (c) Adjustments related to profit attributable to noncontrolling interests due to the increase in equity ownership from 81% to 100% through the share exchange. This is calculated by multiplying SANYO’s net loss for the period and the decrease in noncontrolling interests of 19%.

 

  (d) Adjustment of the average number of shares, excluding treasury stock, underlying the calculation of earnings per share related to the disposal of shares of Panasonic’s treasury stock through the Share Exchange.

Note 4 Expenses Related to the Share Exchange

In connection with the tender offer and Share Exchange, SANYO expects to incur legal, accounting and other related transaction costs and fees. The expenses related to tender offer and Share Exchange will be charged to expenses, in the period incurred. For information on transaction costs and expenses related to tender offer and Share Exchange, see information under “Unaudited Pro Forma Condensed Consolidated Financial Information” to which these notes relate.

 

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SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA

The following table sets forth certain historical pro forma and pro forma equivalent information with respect to net income (loss) per share and dividend per share for the year ended March 31, 2010 and the six months ended September 30, 2010 and net book value per share as of September 30, 2010 for Panasonic and SANYO. The information that follows should be read in conjunction with the unaudited pro forma U.S. GAAP condensed consolidated financial information and related notes included elsewhere in this prospectus, together with the historical U.S. GAAP consolidated financial statements of Panasonic and SANYO included elsewhere in this prospectus.

The comparative pro forma and pro forma equivalent per share data have been included for comparative purposes only and do not purport to be indicative of: (1) the results of operations or financial position, which actually would have been obtained if the Share Exchange had been completed at the beginning of the earliest period presented or as of the date indicated or (2) the results or financial position, which may be obtained in the future.

 

     For the year ended March, 31, 2010  
     Panasonic      SANYO  
     Historical     Pro Forma
Equivalent(2)
     Historical     Pro Forma
Equivalent(3)
 

Cash dividends per share(5)

   ¥ 12.50      ¥ 11.74       ¥ 0.00      ¥ 0.00   

Net loss attributable to common shareholders from continuing operations per share:

         

Basic(1)

     (49.97     (76.62)         (7.94     (9.81)   

Diluted(4)

     —          —           —          —     

 

     As of and for the six months ended September 30, 2010  
     Panasonic      SANYO  
     Historical      Pro Forma
Equivalent(2)
     Historical      Pro Forma
Equivalent(3)
 

Shareholders equity (excluding noncontrolling interest) per share

   ¥ 1,280.94       ¥ 1,380.92       ¥ 17.13       ¥ 21.16   

Cash dividends per share(5)

     5.00         4.70         0.00         0.00   

Net income attributable to common shareholders from continuing operations per share:

           

Basic(1)

     36.09         33.75         1.82         2.25   

Diluted(4)

     —           —           —           —     

 

Notes:

 

1 Calculated using the weighted average number of shares outstanding for the period.
2 Pro forma equivalent for Panasonic were calculated as if the Shares Exchange to exchange one share of SANYO common stock for 0.115 shares of Panasonic common stock took place as of April 1, 2009.
3 Pro forma equivalent for SANYO were calculated as if the number of shares outstanding for SANYO increased through the conversion of SANYO’s preferred shares to common shares upon Panasonic’s acquisition of SANYO and the aforementioned Share Exchange took place as of April 1, 2009.
4 Diluted net income (loss) per share attributable to common shareholders has been omitted because Panasonic and SANYO did not have potentially dilutive common shares that were outstanding for the period.
5 Cash dividends per share reflect those paid during each of the periods indicated.

 

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MARKET PRICE AND DIVIDEND INFORMATION

Panasonic’s common stock is listed on the First Sections of the Tokyo Stock Exchange, the Osaka Securities Exchange and the Nagoya Stock Exchange. Also, American Depositary Shares, each representing one Panasonic share, are listed on the New York Stock Exchange.

SANYO’s common stock is listed on the First Sections of the Tokyo Stock Exchange and the Osaka Securities Exchange.

The following table sets forth, for the periods indicated, the reported high and low prices per share of Panasonic’s common stock on the First Section of the Tokyo Stock Exchange, and the reported high and low composite prices of Panasonic’s ADSs on the New York Stock Exchange:

 

     Tokyo Stock Exchange      New York Stock Exchange  
     Price per Share of
Common Stock (yen)
     Price per American
Depositary Share (dollars)*
 
         High              Low              High              Low      

Fiscal Year ended March 31, 2006

   ¥ 2,650       ¥ 1,485       $ 22.68         $14.19   

Fiscal Year ended March 31, 2007

     2,870         2,080         25.14         17.70   

Fiscal Year ended March 31, 2008

     2,585         1,912         22.59         16.63   

Fiscal Year ended March 31, 2009

     2,515         1,000         24.38         10.60   

Fiscal Year ended March 31, 2010

     1,585         1,062         17.19         10.77   

Fiscal Year ended March 31, 2009:

           

First quarter

     2,515         2,000         24.38         19.71   

Second quarter

     2,380         1,774         22.02         16.54   

Third quarter

     1,882         1,000         17.66         10.91   

Fourth quarter

     1,322         1,016         13.74         10.60   

Fiscal Year ended March 31, 2010:

           

First quarter

     1,510         1,070         15.37         10.77   

Second quarter

     1,541         1,175         16.60         12.76   

Third quarter

     1,356         1,062         14.80         12.40   

Fourth quarter

     1,585         1,228         17.19         13.72   

Fiscal Year ending March 31, 2011:

     

First quarter

     1,480         1,104         15.72         12.35   

Second quarter

     1,212         1,027         13.80         12.14   

Third quarter

     1,272         1,100         15.00         13.19   

Month of:

     

March 2010

     1,449         1,234         15.62         13.75   

April 2010

     1,480         1,345         15.72         14.42   

May 2010

     1,348         1,123         14.70         12.35   

June 2010

     1,288         1,104         14.06         12.43   

July 2010

     1,212         1,040         13.55         12.35   

August 2010

     1,155         1,027         13.35         12.14   

September 2010

     1,170         1,050         13.80         12.75   

October 2010

     1,226         1,100         15.00         13.19   

November 2010

     1,272         1,135         14.95         14.03   

December 2010

     1,220         1,138         14.55         13.67   

January 2011

     1,206         1,120         14.56         13.64   

February 2011 (through February 9, 2011)

     1,138         1,081         13.98         13.12   

 

* The prices of ADSs are based upon reports by the NYSE, with all fractional figures rounded up to the nearest two decimal points.

On February 9, 2011, the last reported sale price of Panasonic shares on the Tokyo Stock Exchange was ¥1,099 per share.

 

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The following table sets forth, for the periods indicated, the reported high and low prices per share of SANYO’s common stock on the First Section of the Tokyo Stock Exchange:

 

     SANYO’s
Common Stock
 
     Price per Share  
     High      Low  

Fiscal year ended March 31, 2006

   ¥ 363       ¥ 237   

Fiscal year ended March 31, 2007

     324         148   

Fiscal year ended March 31, 2008

     241         120   

Fiscal year ended March 31, 2009

     297         110   

Fiscal year ended March 31, 2010

     279         138   

Fiscal year ended March 31, 2009:

     

First quarter

     297         208   

Second quarter

     254         176   

Third quarter

     245         110   

Fourth quarter

     175         132   

Fiscal year ended March 31, 2010:

     

First quarter

     279         138   

Second quarter

     272         188   

Third quarter

     238         148   

Fourth quarter

     177         138   

Fiscal year ending March 31, 2011:

     

First quarter

     159         112   

Second quarter

     152         110   

Third quarter

     138         128   

Month of:

     

March 2010

     154         143   

April 2010

     159         147   

May 2010

     156         125   

June 2010

     135         112   

July 2010

     152         110   

August 2010

     138         136   

September 2010

     138         137   

October 2010

     138         131   

November 2010

     138         130   

December 2010

     138         128   

January 2011

     137         127   

February 2011 (through February 9, 2011)

     130         123   

On February 9, 2011, the last reported sale price of SANYO shares on the Tokyo Stock Exchange was ¥126 per share.

 

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Set forth below are the closing prices of Panasonic’s common stock and SANYO’s common stock on July 28, 2010, the last full trading day prior to the public announcement date on which the two companies had announced the tender offer and the Share Exchange, including the tender offer price, December 21, 2010, the date on which the two companies publicly announced the Share Exchange Ratio, and February 9, 2011. The table also sets forth the implied equivalent value of SANYO’s common stock on these dates, as determined by multiplying the applicable closing price of Panasonic’s common stock by the exchange ratio of 0.115 Panasonic shares per SANYO share. Panasonic urges you to obtain current market quotations for each of the two companies’ common stock.

 

     Panasonic’s
Common Stock
     SANYO’s
Common Stock
 
     Historical      Historical      Equivalent  

July 28, 2010

     ¥1,167       ¥ 118       ¥ 134   

December 21, 2010

     1,169         137         134   

February 9, 2011

     1,099         126         126   

The following table sets forth, for the periods indicated, the dividends per share paid on Panasonic’s common stock and SANYO’s common stock:

 

     Panasonic      SANYO  

Fiscal Year Ended March 31,

     

2006

   ¥ 17.50         —     

2007

     25.00         —     

2008

     32.50         —     

2009

     40.00         —     

2010

     12.50         —     

SANYO Shareholders

According to SANYO’s register of shareholders as of January 12, 2011, there were 6,158,053,099 shares of its common stock issued, of which 6,141,456,040 shares were outstanding and were held by 190,537 shareholders of record, including 52 shareholders of record with addresses in the United States who held 21,091,080 shares, representing approximately 0.34% of the then issued common stock and approximately 0.34% of the then outstanding common stock. Because some of these shares were held by brokers or other nominees, the number of record holders with addresses in the United States may be fewer than the number of beneficial owners in the United States. SANYO is not required by Japanese law to monitor or disclose beneficial ownership of its common stock.

 

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EXCHANGE RATES

The following table sets forth information regarding the noon buying rates for Japanese yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York expressed in Japanese yen per $1.00 during the periods and as of the dates shown. The average exchange rate for the periods shown is the average of the month-end rates during the period. We have translated some Japanese yen amounts presented in this prospectus into U.S. dollars solely for your convenience. Unless otherwise noted, the rate used for the translations was ¥93.40 per $1.00. This was the approximate exchange rate in Japan on March 31, 2010. The translation should not be construed as a representation that the yen amounts have been, could have been, or could in the future be converted into U.S. dollars at the above or any other rate.

The following table shows the noon buying rates for Japanese yen per $1.00.

 

     Low      High      Average      Period-End  

Fiscal Year Ended March 31,

           

2006

   ¥ 120.93       ¥ 104.41       ¥ 113.67       ¥ 117.48   

2007

     121.81         110.07         116.55         117.56   

2008

     124.09         96.88         113.61         99.85   

2009

     110.48         87.80         100.85         99.15   

2010

     100.71         86.12         92.49         93.40   

2011 (through February 4, 2011)

     94.68         80.48         85.21         81.99   

Calendar Year 2010

           

March

   ¥ 93.40       ¥ 88.43         

April

     94.51         92.03         

May

     94.68         89.89         

June

     92.33         88.39         

July

     88.59         86.40         

August

     86.42         84.10         

September

     85.77         83.05         

October

     83.33         80.48         

November

     84.34         80.61         

December

     84.23         81.67         

Calendar Year 2011

           

January

     83.36         81.56         

February (through February 4, 2011)

     81.99         81.48         

On February 4, 2011, the noon buying rate was ¥81.99 = $1.00.

 

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EXTRAORDINARY GENERAL MEETING OF SANYO SHAREHOLDERS

General

SANYO is distributing mail-in-ballots to its shareholders who are entitled to exercise their voting rights (or their standing proxies in Japan, as appropriate) for use at the SANYO extraordinary general meeting, currently expected to be held on March 4, 2011, at The Main Hall in Umeda Arts Theater, 19-1, Chayamachi, Kita-ku, Osaka-City, Osaka, Japan. SANYO is distributing these mail-in-ballots, together with the notice of convocation of the meeting and reference documents concerning the shareholders’ meeting, by mail to its shareholders who have voting rights. Both the notice and mail-in-ballots are written in Japanese. An English translation of the notice of convocation of the meeting and reference documents for the shareholders’ meeting are included as an exhibit to the registration statement of which this prospectus forms a part. An English translation of the mail-in-ballot is also included as an exhibit to such registration statement. This prospectus is furnished to SANYO shareholders resident in the United States in connection with the issuance by Panasonic of shares of Panasonic’s common stock pursuant to the Share Exchange.

The purpose of the SANYO extraordinary general meeting is:

 

  (1) to consider and to vote upon the approval of the Share Exchange Agreement; and

 

  (2) to consider and to vote upon the partial amendments to the articles of incorporation of SANYO.

Voting

Record Date

The close of business on January 12, 2011 has been fixed by the resolution of board of directors to be as the SANYO record date for the determination of the holders of SANYO’s common stock entitled to exercise the shareholders’ rights at the SANYO extraordinary general meeting. SANYO’s shareholders may vote at the SANYO extraordinary general meeting only if they are registered as a holder of one “unit” or more shares of SANYO’s common stock in SANYO’s register of shareholders at that time.

As of January 12, 2011, there were 6,141,456,040 shares of SANYO’s common stock issued and outstanding. Of those, 52 shares were held by residents of the United States. Each unit of shares of SANYO’s common stock outstanding on the SANYO record date is entitled to one vote on each matter properly submitted at the SANYO extraordinary general meeting subject to the limitation by the “Unit share system.” See “Description of Panasonic’s Common Stock—Unit Share System.”

Vote Required

Approval of the Share Exchange requires the affirmative vote of the holders of a two-thirds majority of the voting rights of shareholders of SANYO represented at the extraordinary general meeting of shareholders of SANYO at which shareholders holding one-third of the total voting rights of the shareholders who are entitled to exercise their voting rights are represented.

As of January 12, 2011, the directors, corporate auditors and their affiliates of SANYO owned of record approximately 0.001% of the voting rights of SANYO’s common stock. Also, as of December 21, 2010, directors, corporate auditors and their affiliates of Panasonic owned of record approximately 1.35% of the voting rights of SANYO’s common stock.

Mail-in-ballots

Holders of SANYO’s common stock entitled to vote at the SANYO extraordinary general meeting may vote their shares by mail-in-ballot, using the form in Japanese which SANYO is distributing by mail to those holders.

 

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Revocation

Any person who submits a mail-in-ballot by mail may revoke it any time before it is voted:

 

   

By sending another mail-in-ballot dated a later date than the previous mail-in-ballot to SANYO, or

 

   

By voting in person, or through another shareholder entitled to vote and appointed as such person’s attorney-in-fact, at the general meeting of shareholders of SANYO.

SANYO shareholders who have instructed a broker to vote their shares must follow directions received from their broker to change and revoke their vote.

Questions About Voting SANYO Shares

If SANYO shareholders have any questions about how to vote or direct a vote in respect of their SANYO’s common stock, they may call Koji Honda, Investor Relations Dept., at 81-6-6994-3480.

 

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THE SHARE EXCHANGE

General

The boards of directors of Panasonic and SANYO have agreed to the Share Exchange, to be approved by shareholders’ meeting of SANYO. Pursuant to the Share Exchange, each shareholder of SANYO will receive 0.115 shares of Panasonic’s common stock for each share of SANYO’s common stock that such shareholder holds. If the terms of the Share Exchange are approved by the shareholders’ meeting of SANYO, and if the other conditions for completing the Share Exchange are satisfied, the Share Exchange is expected to become effective on April 1, 2011.

This section of the prospectus describes material aspects of the Share Exchange, including the material provisions of the Share Exchange Agreement. An English-language translation of the Share Exchange Agreement, the original of which is written in Japanese, is included in this prospectus as Appendix A.

Background to the Share Exchange

The Share Exchange is the final step in Panasonic’s turning SANYO into a wholly-owned subsidiary. In order to implement a capital and business alliance with SANYO, Panasonic completed an initial tender offer for shares of SANYO’s common stock and preferred stock in December 2009, and as a result of conversion of all shares of preferred stock into shares of common stock, Panasonic became the owner of 50.2% of SANYO’s voting rights, and accordingly started consolidating SANYO in its consolidated financial statements.

After the completion of the initial tender offer in December 2009, Panasonic and SANYO launched a Collaboration Committee, which has been examining ways in which to create specific synergies. As a result, both companies have set a goal of creating various synergies, using various measures such as strengthening the Panasonic Group’s sales network in the photovoltaic business and optimizing their strengths to the fullest extent in the lithium-ion battery business.

In addition, since SANYO became a consolidated subsidiary of Panasonic, SANYO and Panasonic have had certain joint management strategies as group companies and implemented various collaborative measures, such as initiating sales of the HIT® photovoltaic modules through Panasonic’s sales routes since July 2010. However, the business environment surrounding the Panasonic Group, which includes SANYO and PEW, continues to change dramatically and rapidly. While business expansion opportunities have been offered by the rapidly expanding environment-related and energy-related markets and burgeoning emerging markets, the competition with Korean, Taiwanese, and Chinese companies, as well as Japanese, American, and European companies, has intensified not only in the Digital AVC Networks business, but also in the fields of rechargeable batteries, photovoltaics, and electric vehicle-related business. It has become difficult for companies to effectively compete against global competitors in the expanding market without speeding up strategy execution and implementing all measures to demonstrate further group-wide potential.

In such circumstances, Panasonic considered various measures to further increase the corporate value of its group, and explored the possible acquisition of the shares of SANYO and PEW it did not already own.

Prior to the transaction, the President of Panasonic, Mr. Fumio Ohtsubo, and the Executive Vice President of Panasonic, Mr. Takahiro Mori, with the General Manager, Corporate Planning Group of Panasonic, Mr. Yoshiaki Nakagawa, decided to set up a new project team to commence concrete discussions regarding such a possible acquisition of shares of SANYO and PEW that Panasonic did not already own. Panasonic’s project team discussed possible issues related to such transactions with Panasonic’s financial advisor, Nomura Securities Co. Ltd., its Japanese legal counsel, Nagashima Ohno & Tsunematsu and its U.S. legal counsel, Sullivan & Cromwell LLP.

In late June 2010, SANYO received a proposal from Panasonic to discuss the possibility of the transaction. The President of Panasonic, Mr. Fumio Ohtsubo, the Executive Vice President of Panasonic, Mr. Takahiro Mori,

 

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and the President of SANYO, Mr. Seiichiro Sano had a meeting in which Mr. Ohtsubo proposed Panasonic’s plan to acquire all the shares of SANYO and PEW that Panasonic did not already own in order to make them wholly-owned subsidiaries of Panasonic. During the meeting, SANYO promised to consider the possibility of accepting Panasonic’s proposal.

Following the initial meeting, both Panasonic and SANYO had internal meetings and meetings with their respective outside advisors. Subsequently, the management members of Panasonic and SANYO had ongoing extensive discussions to negotiate the potential acquisition including the offer price, structure, schedule of the tender offer and the share exchange and the strategy of SANYO after the potential acquisition. In light of the proposal received from Panasonic, the management of SANYO engaged in ongoing discussions regarding, and considered, various measures to further increase value for its shareholders and the corporate value of both companies.

After receiving the proposal from Panasonic, SANYO retained ABeam M&A Consulting Ltd. (“ABeam M&A Consulting”) as its financial advisor. SANYO also retained Mori Hamada & Matsumoto as its Japanese legal counsel. Subsequently, SANYO, its financial advisor and its Japanese legal counsel held various meetings to discuss the terms, structure and schedule of the potential transaction and the strategy for negotiations. Among other things, Mori Hamada & Matsumoto provided SANYO’s board of directors with legal advice concerning the decision-making method and procedures to be used by the board of directors, including various procedures related to the planned transaction.

Over the course of the discussions and negotiations between Panasonic and SANYO, Panasonic performed its legal and financial due diligence of SANYO with the assistance of legal and accounting professional firms. As part of this process, Panasonic also conducted an interview of SANYO’s management. On behalf of Panasonic, legal due diligence was conducted by Nagashima Ohno & Tsunematsu, and an accounting due diligence was conducted by KPMG AZSA LLC.

Two weeks prior to the public announcement of the transaction, Panasonic and SANYO had a preliminary consultation meeting on the planned tender offers with the Tokyo Stock Exchange in accordance with its listing rules. Panasonic also had a preliminary consultation meeting on the tender offers with the Kanto Local Finance Bureau after the consultation.

On July 29, 2010, the date of public announcement, SANYO received from ABeam M&A Consulting, acting as its financial advisor and as a third-party valuation institution independent from Panasonic and SANYO, a share valuation report analyzing the value of SANYO’s shares. In addition, on the same date, SANYO’s board of directors received a fairness opinion from ABeam M&A Consulting stating that Panasonic’s proposed tender offer purchase price of 138 yen per share is fair to shareholders of SANYO other than Panasonic, etc. (meaning “Controlling Shareholders and other parties set forth in the Enforcement Regulations” provided for in Article 441-2 of the Securities Listing Regulations of Tokyo Stock Exchange including Panasonic), especially from a financial viewpoint.

On the same date, at a meeting of the board of directors of SANYO (with five out of eight directors in attendance), based in part on the share valuation report and fairness opinion received from ABeam M&A Consulting, it was determined that the tender offer would contribute to the further development of SANYO’s business, that the conditions relating to the tender offer were appropriate, and that the tender offer provided all of SANYO’s shareholders with an opportunity to sell SANYO’s shares for a reasonable price. Thus, a resolution was adopted with the approval of all five of the directors in attendance that SANYO would express its endorsement of the tender offer, and recommend that SANYO’s shareholders tender their shares in the tender offer.

In addition, all of SANYO’s corporate auditors who attended the above board of directors’ meeting (four out of five corporate auditors (including all three outside corporate auditors)) expressed the opinion that they had no objection to SANYO’s board of directors endorsing the tender offer and recommending that SANYO’s shareholders tender their shares. Messrs. Susumu Koike, Junji Esaka and Kenjiro Matsuba, who are directors of

 

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SANYO, were officers or employees of Panasonic or its affiliates until January 2010 (in the case of Mr. Koike), until June 2009 (in the case of Mr. Esaka) or until March 2009 (in the case of Mr. Matsuba), and in addition, Messrs. Susumu Koike and Junji Esaka continued to serve as corporate advisors to Panasonic. Accordingly, those three directors did not participate in any of the discussions or voting on the tender offer, in order to prevent conflicts of interest, and did not participate in any of the discussions or negotiations with Panasonic on behalf of SANYO. Mr. Takae Makita, a corporate auditor of SANYO, was an officer of Panasonic until March 2009 and continued to serve as a corporate advisor of Panasonic. Accordingly, he also did not participate in the above-referenced discussions, for the purpose of maintaining the fairness and the neutrality of SANYO’s decisions.

In addition, on July 29, 2010, Panasonic received from Nomura Securities Co., Ltd., acting as Panasonic’s financial advisor and a third-party valuation institution independent from Panasonic and from SANYO, a valuation report with respect to SANYO’s shares of common stock. Furthermore, on the same date, Panasonic’s board of directors received a fairness opinion from Nomura Securities Co., Ltd. stating that the proposed tender offer purchase price of 138 yen per share was proper for Panasonic from a financial viewpoint.

On July 29, 2010, a meeting of the board of directors of Panasonic was held to consider the planned acquisitions of all shares of SANYO that Panasonic did not already own, including the first-step tender offer. After review and discussions of the terms of the proposal, as well as the valuation report and fairness opinion received from Nomura Securities Co., Ltd., the board of directors of Panasonic unanimously resolved to approve the terms of the transaction scheme.

On July 29, 2010, Panasonic and SANYO announced the details of the tender offer and the acquisition. In addition to the offer price and terms for the tender offer, it was announced by Panasonic that, for the purposes of the share exchange ratio for the second-step share exchange, SANYO’s shares were expected to be valued based on a price equivalent to the tender offer purchase price.

On October 6, 2010, Panasonic completed the tender offer for shares of SANYO that it did not already own at a price of ¥138 per share and as a result increased its ownership percentage to approximately 81% of SANYO’s voting rights.

Following the completion of the tender offer, the management of Panasonic and SANYO had ongoing extensive discussions to negotiate the share exchange ratio for the Share Exchange based on the purchase price for the tender offer, taking into account the results of the tender offer, the market share price levels of shares of Panasonic and other various factors. In addition, in order to ensure the fairness of the share exchange ratio, SANYO took certain steps, such as receiving fairness opinions from two financial advisors and receiving a report from an independent committee, as further discussed below.

SANYO retained ABeam M&A Consulting and Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“Mitsubishi UFJ Morgan Stanley”) as its financial advisors with respect to the Share Exchange. As discussed below, the financial advisors provided SANYO with financial advice, including the provision of valuation reports and fairness opinions. SANYO also retained Seiwa Law Office and Mori Hamada & Matsumoto as its Japanese legal advisors. Among other things, the legal advisors provided SANYO’s board of directors with advice concerning the appropriate procedures and responses regarding the Share Exchange from a legal perspective. In addition, SANYO conducted appropriate due diligence of Panasonic in order to confirm that there were no facts that would materially affect the appropriateness of the Share Exchange. The results of the due diligence were shared with SANYO’s financial and legal advisors, as well as with the independent committee described below. SANYO, its financial advisors and its Japanese legal advisors held various meetings to discuss the terms, structure and schedule of the Share Exchange and the strategy for negotiations.

Panasonic Corporation continued to retain Nomura Securities Co. Ltd. as its financial advisor, Nagashima Ohno & Tsunematsu as its Japanese legal counsel, and Sullivan & Cromwell LLP as its U.S. legal counsel.

 

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In addition, in order to further ensure the transparency, reasonableness, impartiality and fairness of the Share Exchange, the SANYO board of directors established an independent committee of three outside experts independent of SANYO and Panasonic (the “Independent Committee”). The Independent Committee was comprised of Mr. Yasuhiro Kawaguchi (Professor and Dean of the Faculty of Law of Doshisha University), Mr. Kiyoshi Seki (Lawyer of Miyazaki Law Firm) and Mr. Ryuichi Hirata (Certified Public Accountant and Partner of Ernst & Young ShinNihon LLC). The SANYO board of directors consulted with the Independent Committee on (1) whether the fairness of the process used to determine the share exchange ratio and other aspects of the Share Exchange was ensured and (2) whether full consideration was given in the share exchange ratio to the interests of SANYO’s shareholders other than Panasonic, etc. was given through fair procedures.

Meetings of the Independent Committee were held seven times in total from November 8, 2010 to December 20, 2010. During this period, the Independent Committee collected information on the matters on which the Board of Directors of SANYO consulted it, and carefully discussed and reviewed such matters. As a part of this process, the Independent Committee received an explanation from SANYO on the contents of the proposal made by Panasonic to SANYO, the background leading up to the Share Exchange, SANYO’s opinion regarding the Share Exchange, and the negotiation process for, as well as the process used to determine, various conditions of the Share Exchange, including the proposed share exchange ratio. Furthermore, the Independent Committee exchanged views regarding, among other things, the fairness of the process used to determine the share exchange ratio, and the consideration of the interests of SANYO’s minority shareholders. In addition, the Independent Committee had the opportunity to receive an explanation from ABeam M&A Consulting and Mitsubishi UFJ Morgan Stanley on their respective valuation reports and fairness opinions, as well as to ask questions to these financial advisors.

As a result of the Independent Committee’s careful review and consideration described above, on December 20, 2010, the Independent Committee submitted a report to the Board of Directors of SANYO stating its belief that (1) the fairness of the process used to determine the share exchange ratio and other aspects of the Share Exchange was ensured, and (2) full consideration was given in the share exchange ratio to the interests of the shareholders of SANYO other than Panasonic, etc. through fair procedures.

On the same date, SANYO received from ABeam M&A Consulting acting as SANYO’s financial advisor and as a third-party valuation institution independent from Panasonic and SANYO, valuation report calculating the share exchange ratio based on various valuation methodologies. In addition, on the same date, SANYO’s board of directors received fairness opinion from ABeam M&A Consulting stating that Panasonic’s proposed share exchange ratio of 0.115 Panasonic shares per share of SANYO (the “Share Exchange Ratio”) is, from a financial viewpoint, fair to the shareholders of SANYO other than Panasonic, etc.

Also, on the same date, SANYO received from Mitsubishi UFJ Morgan Stanley separately, acting as SANYO’s financial advisor and as a third-party valuation institution independent from Panasonic and SANYO, a valuation report calculating the share exchange ratio based on various valuation methodologies. In addition, on the same date, SANYO’s board of directors received a fairness opinion from Mitsubishi UFJ Morgan Stanley stating that Panasonic’s proposed Share Exchange Ratio is, from a financial viewpoint, fair to the shareholders of SANYO other than Panasonic.

On December 21, 2010, at a meeting of the board of directors of SANYO (with five out of eight directors in attendance), based in part on the valuation reports and fairness opinions received from ABeam M&A Consulting and Mitsubishi UFJ Morgan Stanley and the report submitted by the Independent Committee, the SANYO board determined that the Share Exchange Ratio is fair and would not undermine the interests of its shareholders. In view of the above, a resolution was adopted with the approval of all five of the directors in attendance to conduct the Share Exchange, and to execute the Share Exchange Agreement.

In addition, all of SANYO’s corporate auditors who attended the above board of directors’ meeting (four out of five corporate auditors (including all three outside corporate auditors)) expressed the opinion that they did not recognize any facts that would constitute a violation of the duty of due care and diligence and/or the fiduciary

 

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duty of directors in relation to SANYO’s execution of the Share Exchange Agreement with Panasonic. As was the case with the discussions, votes and negotiations leading to the approval of the first-step tender offer, Messrs. Susumu Koike, Junji Esaka and Kenjiro Matsuba, who are directors of SANYO, did not participate in any deliberations or resolutions regarding the share exchange ratio and the execution of the Share Exchange Agreement and did not participate in any of the discussions or negotiations with Panasonic on behalf of SANYO, in order to prevent any conflicts of interest arising from their status as former officers or employees of Panasonic (in the case of Messrs. Koike, Esaka and Matsuba) or their continuing service as corporate advisors to Panasonic (in the case of Messrs. Koike and Esaka). In addition, Mr. Takae Makita, a corporate auditor of SANYO, also did not participate in the above-referenced deliberations, in order to prevent any conflicts of interest arising from his status as a former officer of Panasonic and his continuing service as a corporate advisor to Panasonic.

In addition, on December 21, 2010, Panasonic received from Nomura Securities Co., Ltd., acting as Panasonic’s financial advisor and a third-party valuation institution independent from Panasonic and from SANYO, a valuation report with respect to the Share Exchange. Furthermore, on the same date, Panasonic’s board of directors received a fairness opinion from Nomura Securities Co., Ltd. stating that the Share Exchange Ratio is proper for Panasonic from a financial viewpoint.

On December 21, 2010, a meeting of the board of directors of Panasonic was held to consider the planned acquisition of all shares of SANYO that Panasonic did not already own through the Share Exchange. After review and discussions of the terms of the proposal, as well as the valuation report and fairness opinion received from Nomura Securities Co., Ltd., the board of directors of Panasonic unanimously resolved to approve the terms of the Share Exchange.

On December 21, 2010, Panasonic and SANYO announced the details of the Share Exchange, including the Share Exchange Ratio. The announcement also noted that the Share Exchange Ratio may be subject to change upon consultations between SANYO and Panasonic in the case of any material changes to the assumptions underlying the calculation of the Share Exchange Ratio. The Share Exchange is expected to be implemented after the Share Exchange Agreement is approved by SANYO shareholders at an extraordinary general meeting of shareholders scheduled for March 4, 2011. The Share Exchange is scheduled to occur on April 1, 2011.

Reasons for the Share Exchange

As discussed above, the business environment surrounding the Panasonic Group continues to change dramatically and rapidly. Thus, it is indispensable for the Panasonic Group to speed up strategy execution and take further advantage of the total strengths of the group in order to effectively compete against the competition and achieve business growth in new markets. As a result, Panasonic made a determination to turn both SANYO and PEW, which are both currently consolidated subsidiaries, into wholly-owned subsidiaries through simultaneous first-step tender offers and subsequent share exchanges.

Through ownership of all of the shares of both SANYO and PEW, Panasonic intends to dynamically accelerate, and to achieve further progress under, its business plan by promoting rapid decision making and maximizing group synergies. Panasonic, PEW and SANYO intend to pursue the establishment of the new Panasonic Group, under which the three companies will be genuinely integrated, and will make efforts to (i) maximize value creation by strengthening contacts with customers, (ii) realize speedy and lean management, and (iii) accelerate business growth by boldly shifting management resources.

Furthermore, in order to realize these objectives, the Panasonic Group’s business organization is scheduled to be restructured by around January 2012. From the perspective of “maximization of customer value,” the basic policy of such restructuring is to integrate and reorganize the business and marketing divisions of the three companies into three business sectors: “Consumer,” “Components and Devices” and “Solutions,” and to design optimal business models that are most suitable for the character of each business. In addition, the Panasonic Group will reorganize its current 16 domain companies into nine, based on these new business sectors and as

 

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described below. The Panasonic Group will make efforts to establish a business organization under which it can effectively compete against global competitors in each business and in each industry.

Currently, the direction of the reorganization of each business sector is expected to be as follows:

 

   

Consumer business sector:

The Panasonic Group intends to reorganize its marketing function on a global basis, and reorganize its marketing divisions, including Japan, to a global consumer marketing division. Under the reorganization, the Panasonic Group intends to enhance the function of its frontline business and accelerate the creation of customer-oriented products. Also, the Panasonic Group intends to work to strengthen, among others, its overseas consumer business by strategically distributing its marketing resources in Japan and overseas.

The Panasonic Group expects that the consumer business sector will have two domain companies: (1) AVC networks and (2) heating/refrigeration/air condition and home appliances. The AVC networks domain company will focus on creation of new businesses with next-generation products, with a unified concept of business and technology. The heating/refrigeration/air condition and home appliances domain company will aim to be the leading green innovation company in the home appliances business, with a strong line-up ranging from consumer use to commercial use, and is expected to globally expand its business in personal care and health enhancing products and cooking appliances.

 

   

Components and Devices business sector:

The Panasonic Group intends to strengthen cooperation among the development, production and sales functions for each component and device having a common business model. By combining marketing and technology, the Panasonic Group intends to strengthen its “proposal-style” business, which foresees the potential needs of customers and aim to expand the business as an independent business that does not rely on internal needs. Particularly in this business sector, the Panasonic Group intends to continue to make maximum use of SANYO’s strengths, such as its rechargeable batteries business and solar business, as well as its customer network.

Specifically, the Panasonic Group expects that the components and devices business section will have three domain companies: (1) automotives, (2) devices and (3) energy devices. These three domain companies are expected to cooperate in providing strategic customer services and conducting new sales development, with a department established for the purposes of such cooperation. The automotive domain company will aim to strengthen multimedia systems displays, create new growth markets such as EV and e-cockpit, and establish a robust Japanese market share for car navigation systems. The devices domain company will aim to develop new markets and customer with new products and technologies, and focus on environment and energy, healthcare and medical, material and devices, automotives and emerging markets. The energy devices domain company will aim especially to strengthen its lithium-ion battery and solar battery businesses.

 

   

Solutions business sector:

The Panasonic Group intends to unify the development, production and sales functions for each solution for business customers. The Panasonic Group aims to offer the most suitable products, services and solutions as quickly as possible, grasping customers’ needs in as timely a fashion as possible. In addition, the “comprehensive solutions for the entire home, the entire building and the entire town” that encompass these solutions will be accelerated. Particularly in this business sector, the Panasonic Group intends to continue to make maximum use of the strength and customer network of PEW.

Specifically, the Panasonic group expects that the solutions business sector will have four domain companies: (1) security and communication solutions, (2) environment and energy solutions,

 

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(3) healthcare and medical solutions, and (4) factory solutions. The security and communications solutions domain company will aim to provide “network” solutions with the Panasonic Group’s comprehensive technologies, from fixed to wireless communications, including mobile phones. The environment and energy solutions domain company will focus on contributing to a comfortable eco-conscious lifestyle, and aim for unconventional growth through comprehensive solutions and sales, and effective collaboration with other domain companies. The healthcare and medical solutions domain company is expected to serve as a pillar of the next generation business and assist in providing simple and affordable healthcare service, including contributing to the robot business with products such as a “robotic bed”. The factory solutions domain company will aim to contribute to the progress and development of global society with manufacturing solutions, including the development of new businesses in mounting and circuit fabrication and welding, and laser technology.

In addition, the environment and energy domain company will lead the “comprehensive solutions” initiative, which will involve four steps: (1) offer a packaged series as a whole set to a specific space, (2) utilize network-packaged equipment, (3) have a vertical value chain business to offer coherent value from sales to customer services, and (4) create a unique “comprehensive solutions” business model. The goal is to create such a unique business model that combines vertical and horizontal value chains from the planning stage through participation in the “smart city” projects in the world.

In addition to the reorganization, the head office will aim for a “lean and speedy” global head office by strengthening its strategic functions, while integrating and streamlining the three companies’ organizations. The nine domain companies will be responsible for managing their businesses autonomously, while the new head office will focus on three functions: (1) develop a group-wide growth strategy, (2) establish group core competencies and (3) offer services beyond the domain companies’ capabilities. The new head office is expected to have a global head office to govern the Panasonic Group based on each functional classification and regional management companies based on each region. By organizing the head office with a focus on indispensable functions, the Panasonic Group believes that it will be able to create new local businesses and solve local issues.

Further, together with this reorganization, Panasonic Group intends to integrate its brands, in principle, into “Panasonic” in the future. However, Panasonic Group expects that “SANYO” will continue to be partially utilized, depending on the particular business or region.

Panasonic Group believes that the acquisitions and business reorganizations mentioned above will promote the integration of the three companies’ advantages and the “proposal” capabilities for “comprehensive solutions,” and will enable rapid increase in global competitiveness especially in the “energy systems,” “heating/refrigeration/air conditioning” and “network AV” business, which are core businesses to lead sales and profits of the entire group companies. Also, in each business such as “healthcare,” “security,” and “LED,” which is positioned as a “key business for the next generation,” Panasonic will make efforts to accelerate the growth of such business by combining the capacities of the three companies for research and development, as well as market development.

Additionally, Panasonic intends to realize further reinforcement of management structure and cost competitiveness through business integration and unification of the business bases of the three companies, and through optimizing and streamlining its head office organization.

Determination of SANYO’s Board of Directors

As described in further detail above under “—Background to the Share Exchange”, on December 21, 2010, the SANYO board of directors adopted a resolution approving the execution of the Share Exchange Agreement. In making this determination, the SANYO board of directors considered a number of factors, including the ones described below.

 

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With respect to the appropriateness of the Share Exchange Ratio, the SANYO board of directors considered the following:

 

   

The fact that ABeam M&A Consulting, a third-party valuation institution independent from Panasonic and SANYO, calculated the following share exchange ratio ranges: a range of 0.115 to 0.120 based on a market price analysis; a range of 0.061 to 0.105 based on a similar companies comparison analysis; and a range of 0.038 to 0.063 based on a discounted cash flow analysis. For more details on the financial analyses delivered by ABeam M&A Consulting, see “—Opinions of Financial Advisors—ABeam M&A Consulting”.

 

   

The fact that Mitsubishi UFJ Morgan Stanley, a third-party valuation institution independent from Panasonic and SANYO, calculated the following share exchange ratio ranges: using December 17, 2010 as the record date, a range of 0.110 to 0.123 based on a historical share exchange ratio analysis; and using July 28, 2010 as the record date, a range of 0.095 to 0.115 based on a historical share exchange analysis, a range of 0.032 to 0.071 based on a comparable companies analysis, a range of 0.103 to 0.136 based on a precedent transaction analysis, and a range of 0.027 to 0.053 based on a discounted cash flow analysis. For more details on the financial analyses delivered by Mitsubishi UFJ Morgan Stanley, see “—Opinions of Financial Advisors—Mitsubishi UFJ Morgan Stanley”.

 

   

The fact that the Share Exchange Ratio was carefully considered by each of SANYO and Panasonic, including with reference to the valuation reports received from third-party valuation institutions, and that the Share Exchange Ratio was the result of extensive negotiations and discussions between SANYO and Panasonic based on the tender offer price of ¥138 per share, taking into account such factors as the results of the tender offer, the market price level of Panasonic’s shares (a one-month average of ¥1,201 per share, based on a record date of December 17, 2010).

 

   

The fact that the Share Exchange Ratio is within or above each of the share exchange ratio ranges calculated by ABeam M&A Consulting and Mitsubishi UFJ Morgan Stanley.

In order to ensure the fairness of the Share Exchange Ratio and to avoid conflicts of interests, the SANYO board of directors took the following measures:

 

   

In order to ensure the transparency, reasonableness, impartiality and fairness of the Share Exchange, the SANYO board of directors established the Independent Committee comprised of experts independent of SANYO and Panasonic. After conducting the necessary investigation and conducting careful deliberations, the Independent Committee submitted a report to the SANYO board of directors stating its belief that (1) the fairness of the process used to determine the Share Exchange Ratio and other aspects of the Share Exchange was ensured and (2) full consideration was given in the Share Exchange Ratio to the interests of shareholders of SANYO other than Panasonic, etc. through fair procedures.

 

   

SANYO had conducted appropriate due diligence of Panasonic and confirmed that there were no facts that would materially affect the share exchange ratio or other terms of the Share Exchange as agreed by the two companies. In addition, the results of the due diligence were provided to the Independent Committee, ABeam M&A Consulting and Mitsubishi UFJ Morgan Stanley, and facts that could affect Panasonic’s share valuation were taken into account in consideration the Share Exchange Ratio.

 

   

SANYO received a fairness opinion from ABeam M&A Consulting stating that the Share Exchange Ratio is, from a financial point of view, fair to the shareholders of SANYO other than Panasonic, etc.

 

   

SANYO received a fairness opinion from Mitsubishi UFJ Morgan Stanley stating that the Share Exchange Ratio is, from a financial point of view, fair to the shareholders of SANYO other than Panasonic.

 

   

Messrs. Koike, Esaka and Matsuba, who are directors of SANYO, did not participate in any deliberations or resolutions regarding the Share Exchange Ratio and the execution of the Share

 

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Exchange Agreement, and did not participate in any of the discussions or negotiations with Panasonic on behalf of SANYO, in order to prevent any conflicts of interest arising from their status as former officers or employees of Panasonic (in the case of Messrs. Koike, Esaka and Matsuba) or their continuing service as corporate advisors to Panasonic (in the case of Messrs. Koike and Esaka). In addition, Mr. Takae Makita, a corporate auditor of SANYO, also did not participate in the above-referenced deliberations, in order to prevent any conflicts of interest arising from his status as a former officer of Panasonic and his continuing service as a corporate advisor to Panasonic.

 

   

SANYO’s legal advisors provided the SANYO board of directors with advice concerning the appropriate procedures and responses regarding the Share Exchange from a legal perspective.

Opinions of SANYO’s Financial Advisors

ABeam M&A Consulting and Mitsubishi UFJ Morgan Stanley have acted as financial advisors to SANYO in connection with the Share Exchange and have each provided written opinions (fairness opinions) to the board of directors of SANYO.

ABeam M&A Consulting

ABeam M&A Consulting rendered its written opinion in Japanese to the board of directors of SANYO that, as of December 20, 2010, and based upon and subject to the factors and assumptions set forth therein, the proposed Share Exchange Ratio between Panasonic’s common stock and SANYO’s common stock was fair from a financial point of view to the shareholders of SANYO other than Panasonic, etc.

The full text of an English translation of the written opinion of ABeam M&A Consulting, dated December 20, 2010, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Appendix B to this prospectus and is incorporated by reference into this prospectus. ABeam M&A Consulting provided its opinion only for the information and assistance of the board of directors of SANYO in connection with its evaluation of the fairness of the Share Exchange Ratio from a financial point of view to the shareholders of SANYO other than Panasonic, etc. ABeam M&A Consulting’s opinion does not constitute a recommendation as to how any shareholder of SANYO should vote or act on the Share Exchange or any matter relating thereto. It also does not express any opinion as to the prices at which any shares of Panasonic or SANYO will trade following the announcement of the Share Exchange Ratio or the consummation of the Share Exchange. In addition, the board of directors of SANYO did not ask ABeam M&A Consulting to address, and the opinion does not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of SANYO, other than whether the Share Exchange Ratio is fair from a financial point of view to the shareholders of SANYO other than Panasonic, etc. The following summary of ABeam M&A Consulting’s opinion is qualified in its entirety by reference to the full text of such opinion. The shareholders of SANYO are urged to read ABeam M&A Consulting’s opinion carefully and in its entirety.

In arriving at its opinion on the fairness of the Share Exchange Ratio from a financial point of view, ABeam M&A Consulting, among other things:

 

  (1) reviewed a draft of the Share Exchange Agreement;

 

  (2) reviewed financial information and other related information disclosed in the annual securities reports of Panasonic and SANYO for the fiscal years ending in March 31, 2008, March 31, 2009, and March 31, 2010, and the quarterly financial reports of such companies for the quarters ending in June 30, 2010 and September 30, 2010;

 

  (3) reviewed the draft of a press release dated December 20, 2010 and titled “Panasonic Announces that it Makes SANYO its Wholly-owned Subsidiary through Share Exchange”, which was announced by Panasonic and SANYO on December 21, 2010;

 

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  (4) reviewed the figures and the assumptions in “SANYO Mid-term Management Plan for Three Years Ending in March 2013” announced in May 2010 and SANYO’s business plan on which the mid-term management plan is based (collectively the “Released New Mid-term Plan”);

 

  (5) held discussions with officers and employees in the relevant departments at the headquarters of SANYO, who are independent from Panasonic, about the figures, assumptions, progress, and achievability of the Released New Mid-term Plan;

 

  (6) reviewed the press releases related to the following, announced by SANYO in or after May 2010 (the “Press Releases commencing from May 2010”):

 

   

SANYO’s opinion on its recommendation to subscribe to Panasonic’s tender offer for SANYO’s shares by Panasonic announced on July 29, 2010

 

   

financial information, such as summary reports of quarterly financial results, revised earnings forecasts, and other related information;

 

   

information related to purchases and sales of businesses and the reorganization, as they relate to SANYO, and other related information; and

 

   

other press releases that ABeam M&A Consulting considered appropriate to review;

 

  (7) reviewed analysis data prepared by SANYO, about the effects on the Released New Mid-term Plan if SANYO becomes a wholly owned subsidiary company of Panasonic, assuming that the tender offer is completed and the Share Exchange is executed, and other related information (the “Synergy Estimate”);

 

  (8) reviewed the figures and the assumptions in Panasonic’s new mid-term management plan “Green Transformation 2012 (GT12)” announced in May 7, 2010 and Panasonic’s business plan on which the new mid-term management plan is based (collectively the “GT12”);

 

  (9) held discussions with officers and employees in the relevant departments at the headquarters of Panasonic about the assumptions, progress and achievability of GT12;

 

  (10) reviewed the forecast figures and assumptions for the fiscal year ending in March 31, 2011 that were disclosed in Panasonic’s summary report of quarterly financial results for the quarter ending in September 30, 2010, which is titled “Consolidated Financial Results for Second Quarter and Six Months ended September 30, 2010”;

 

  (11) reviewed the press releases related to the following, announced by Panasonic in or after May 2010:

 

   

commencement and results of the tender offer;

 

   

the tender offer for shares of PEW by Panasonic announced on July 29, 2010 and the results of this tender offer;

 

   

information related to the financing of Panasonic;

 

   

financial information, such as summary reports of quarterly financial results, revised earnings forecasts, and other related information;

 

   

information related to purchases and sales of businesses and the reorganization, as they relate to Panasonic, and other related information; and

 

   

other press releases that ABeam M&A Consulting considered appropriate to review;

 

  (12) reviewed various due diligence reports on Panasonic (dated December 3, 2010) submitted by outside experts;

 

  (13) held discussions with members of the management of Panasonic and SANYO about operations, financial affairs, and possible subsequent events, etc. with respect to each of Panasonic and SANYO and reviewed documents regarding such matters;

 

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  (14) reviewed current and historical market prices and trading activity of Panasonic’s common stock and SANYO’s common stock;

 

  (15) reviewed market prices of common stock of other companies comparable to Panasonic and SANYO;

 

  (16) reviewed publicly available documents and analyst reports of Panasonic and SANYO, and trends of the industries in which Panasonic and SANYO operate; and

 

  (17) reviewed other documents, data and information ABeam M&A Consulting deemed necessary or appropriate.

In preparing its opinion, ABeam M&A Consulting has assumed and relied on the items below. ABeam M&A Consulting does not assume any responsibility for independently verifying the items, and ABeam M&A Consulting does not intend to give any opinion regarding such assumptions.

 

  (1) ABeam M&A Consulting has assumed that all of the above-mentioned data and information ABeam M&A Consulting analyzed are accurate and complete. ABeam M&A Consulting neither has independently verified nor assumed the responsibility for independently verifying the accuracy or completeness of the data and information. ABeam M&A Consulting has assumed that none of the data and information it analyzed lacks any material information for the purpose of its opinion and for the arrival at its opinion without any misunderstanding.

 

  (2) ABeam M&A Consulting has assumed that the Released New Mid-term Plan was reasonably prepared and provided by SANYO based on the best currently available estimates and judgments.

 

  (3) ABeam M&A Consulting has assumed that GT12 was reasonably prepared and provided by Panasonic based on the best currently available estimates and judgments.

 

  (4) ABeam M&A Consulting has assumed that the data analyzing the effects of the Press Releases commencing from May 2010 on the Released New Mid-term Plan was reasonably prepared and provided by SANYO based on the best currently available estimates and judgments as of December 20, 2010.

 

  (5) ABeam M&A Consulting has assumed that the Synergy Estimate was reasonably prepared and provided by SANYO based on the best currently available estimates and judgments and took into account discussions and negotiations with Panasonic.

 

  (6) ABeam M&A Consulting has assumed that all items required to be disclosed under the Financial Instruments and Exchange Law of Japan (including its associated regulations) and the rules of the financial instruments exchanges (including the rules of timely disclosure of the Tokyo Stock Exchange and the Osaka Stock Exchange, etc.) that may cause a material effect on the market price of Panasonic’s common stock or SANYO’s common stock were disclosed timely and appropriately, and there has been no action (including inappropriate disclosure) that may adversely affect the formulation of a fair price of Panasonic’s common stock or SANYO’s common stock on the financial instruments exchanges. ABeam M&A Consulting has also assumed that all governmental, regulatory and other consents and approvals necessary for the execution of the Share Exchange will be obtained without any adverse effect on the benefits of the Share Exchange.

 

  (7) ABeam M&A Consulting has assumed that the past consolidated financial statements, unconsolidated financial statements and other related information of Panasonic and SANYO (including the group companies of Panasonic and SANYO) were prepared in accordance with generally accepted accounting principles in Japan or in the U.S., as the case may be. ABeam M&A Consulting neither has independently verified nor assumed the responsibility for independently verifying that the past consolidated financial statements, unconsolidated financial statements and other related information of Panasonic and SANYO (including the group companies of Panasonic and SANYO) were prepared in accordance with generally accepted accounting principles in Japan or the U.S. (including without limitation whether there are any differences between Japan and U.S. generally accepted accounting principles as applied to such financial statements or other information).

 

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  (8) ABeam M&A Consulting neither has independently evaluated nor assumed the responsibility for independently evaluating the assets and liabilities (including off-balance-sheet items and contingent liabilities) of Panasonic and SANYO (including the group companies of Panasonic and SANYO). ABeam M&A Consulting is not expert in evaluating assets (including deferred income tax assets), liabilities, allowances for bad debts, various other allowances such as allowances for retirement benefits, or unrealized gains or losses due to fluctuations in prices of real estate and securities. In addition, ABeam M&A Consulting has not independently evaluated the appropriateness of the changes in the values of the assets and liabilities of Panasonic and SANYO (including the group companies of Panasonic and SANYO) or the adequacy of the allowances in such companies, nor has ABeam M&A Consulting evaluated the solvency of Panasonic or SANYO under any laws relating to bankruptcy, insolvency or similar matters.

 

  (9) ABeam M&A Consulting has assumed that there are no material liabilities or contingent liabilities, such as lawsuits, other than those disclosed in the above-mentioned data and information in connection with Panasonic and SANYO (including the group companies of Panasonic and SANYO).

 

  (10) ABeam M&A Consulting has assumed that there is no data or information that may affect the Share Exchange Ratio other than the data and information ABeam M&A Consulting has analyzed and considered.

 

  (11) ABeam M&A Consulting has assumed that there are no agreements (oral or written) that have been concluded or are expected to be concluded with respect to the Share Exchange and must be reviewed and considered by it for the purpose of its opinion other than the draft of the Share Exchange Agreement that it has reviewed and considered for the purpose of its opinion.

 

  (12) With respect to the draft of the Share Exchange Agreement and the above-mentioned data and information that have not been finalized, ABeam M&A Consulting has assumed that the final versions will not contain any material change from the versions ABeam M&A Consulting has reviewed and considered.

The following is a summary of the material financial analyses delivered by ABeam M&A Consulting to the board of directors of SANYO in connection with rendering the opinion described above. The following summary (including the tables), however, does not purport to be a complete description of the financial analyses performed by ABeam M&A Consulting, nor does the order of analyses described represent the relative importance or weight given to those analyses by ABeam M&A Consulting. The summary includes information presented in tabular format. In order to better understand the financial analyses, the tables must be read together with the full text of each summary. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before December 17, 2010 and is not necessarily indicative of market conditions thereafter.

Basis of the valuation

When calculating the share exchange ratio to be applied to Panasonic’s common stock, ABeam M&A Consulting employed the market price analysis, the similar companies comparison analysis and discounted cash flow analysis in valuing Panasonic’s common stock. The summary of such analyses for the share exchange ratio is included below. With respect to the calculation of the value per share of the subject SANYO’s common stock, ABeam M&A Consulting also separately provided to the board of directors of SANYO its opinion related to the tender offer that the tender offer purchase price of 138 yen per share of SANYO was fair (subject to the content of such opinion) to the shareholders of SANYO (other than Panasonic, etc.) from a financial point of view. Based on ABeam M&A Consulting’s review of the data and information, as well as based on the assumptions, in relation to and for the purpose of ABeam M&A Consulting’s opinion related to the Share Exchange, ABeam M&A Consulting reviewed, for the period from the announcement of the tender offer (i.e., July 29, 2010, the date as of which ABeam M&A Consulting calculated the value of SANYO’s shares) until December 17, 2010, whether there were any events or facts, or any other item, that had a material impact on the financial condition

 

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and earnings projections or business forecasts of SANYO or on any other item related to the valuation of SANYO’s shares for the purpose of the valuation of SANYO’s shares subject to the Share Exchange. As a result of such review, ABeam M&A Consulting concluded that there were no events or facts that had any material impact on the value of SANYO’s shares for the purposes of ABeam M&A Consulting’s opinion related to the Share Exchange that were not already included in ABeam M&A Consulting’s assumptions, calculations and valuation of SANYO’s shares as of July 29, 2010, the date as of which ABeam M&A Consulting calculated the value of SANYO’s shares, for the purposes of ABeam M&A Consulting’s fairness opinion in relation to the tender offer; therefore, ABeam M&A Consulting conducted its fairness evaluation in relation to the Share Exchange Ratio using the tender offer price for SANYO’s shares (i.e., 138 yen) as the value of SANYO’s shares for the purpose of ABeam M&A Consulting’s opinion in relation to the Share Exchange Ratio. For reference purposes, the valuations of SANYO’s shares as of July 29, 2010 (for the purpose of the tender offer), and therefore (because the valuation of SANYO’s shares for the purpose of the Share Exchange Ratio was based on the valuation for the purpose of the tender offer) as of December 17, 2010 for the purpose of the Share Exchange Ratio, were based on the market price analysis, the similar companies comparison analysis and the discounted cash flow analysis. The summary of such analyses for the share exchange ratio is also included below.

1. Panasonic

Market Price Analysis

ABeam M&A Consulting reviewed the average closing trading prices and value weighted average prices (“VWAP”) for the period commencing on July 30, 2010 (the business day immediately following July 29, 2010 on which the press release by Panasonic titled “Panasonic Announces Commencement of Tender Offer for Shares of Common Stock of SANYO” was released), and for the periods of three month and one month on and until December 17, 2010, which is the calculation base date, and the closing trading price on the calculation base date for Panasonic’s common stock on the first section of the Tokyo Stock Exchange. Based on such review and using 138 yen for SANYO’s share value, ABeam M&A Consulting calculated the resulting exchange ratios as follows:

 

Average Closing Trading Prices and VWAP

  

Periods

   Resulting Exchange Ratio  

Calculation Base Date

   December 17, 2010      0.119   

1 Month Average

   November 18, 2010 to December 17, 2010      0.115   

3 Month Average

   September 21, 2010 to December 17, 2010      0.117   

July 30 to Calculation Base Date

   July 30, 2010 to December 17, 2010      0.120   

Similar Companies Comparison Analysis

ABeam M&A Consulting used multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”) and multiples of net income for the similar companies comparison analysis of Panasonic’s common stock.

To calculate EBITDA multiples, ABeam M&A Consulting reviewed and compared certain financial information of Panasonic, as confirmed in discussions with officers of SANYO, to the corresponding financial information of the following publicly traded companies in the electronics industry in Japan. These companies were: ALPS ELECTRIC CO., LTD., Cleanup Corporation, DAIWA HOUSE INDUSTRY CO., LTD., Elpida Memory Inc., FUJITSU LIMITED, GS Yuasa Corporation, Hitachi, Ltd., JS Group Corporation, KYOCERA CORPORATION, MABUCHI MOTOR CO., LTD., MINEBEA CO., LTD., Mitsubishi Electric Corporation, Mitsui Home Co., Ltd., Murata Manufacturing Co., Ltd., NICHICON CORPORATION, NIDEC CORPORATION, NIPPON CHEMI-CON CORPORATION, ROHM COMPANY LIMITED, Sharp Corporation, Shin-Kobe Electric Machinery Co., Ltd., SONY CORPORATION, TAIYO YUDEN CO., LTD., TAKARA STANDARD CO., LTD., TDK CORPORATION, The Furukawa Battery Co., Ltd., TOKEN CORPORATION, TOSHIBA CORPORATION and TOTO LTD.

 

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To calculate net income multiples, ABeam M&A Consulting reviewed and compared certain financial information of Panasonic, as confirmed in discussions with officers of SANYO, to the corresponding financial information of the following publicly traded companies in the consumer electronics industry in Japan. These companies were: Hitachi, Ltd., Mitsubishi Electric Corporation, Sharp Corporation, SONY CORPORATION and TOSHIBA CORPORATION.

Although none of the selected companies is directly comparable to Panasonic, the companies included were chosen because they are publicly traded companies with operations that, for the purposes of ABeam M&A Consulting’s analysis, may be considered similar to certain operations of Panasonic.

For the EBITDA multiples, ABeam M&A Consulting used the selected publicly traded companies’ average EBITDA multiples. The EBITDA multiples of each selected publicly traded company was calculated by dividing the enterprise values based on, among other things, the average closing trading prices from September 21, 2010 to December 17, 2010 by each selected publicly traded company’s EBITDA for the last twelve months (“LTM”) ending September 30, 2010 and EBITDA estimated by IBES and Toyo Keizai for the fiscal years ending March 31, 2011, March 31, 2012 and March 31, 2013(1).

For the net income multiples, ABeam M&A Consulting used the selected publicly traded companies’ average net income multiples. The net income multiples of each selected publicly traded company was calculated by dividing the market values based on, among other things, the average closing trading prices from September 21, 2010 to December 17, 2010 by each selected publicly traded company’s net income estimated by IBES for the fiscal years ending March 31, 2011, March 31, 2012 and March 31, 2013.

ABeam M&A Consulting calculated the above-mentioned financial multiples of the selected companies, and using 138 yen for SANYO’s share value, calculated the resulting exchange ratios as follows:

 

     Multiple Range  for
Panasonic
     Resulting  Exchange
Ratio
 

EBITDA Multiple

     4.7x - 5.6x         0.068 ~ 0.105  

Net Income Multiple(1)

     13.4x - 21.9x         0.061 ~ 0.093  

 

(1) The valuations of the LTM and the fiscal year ending March 31, 2011 were not included in the calculations due to the temporary nature of the expenses related to the reorganization of Panasonic.

Discounted Cash Flow Analysis

ABeam M&A Consulting performed a discounted cash flow analysis on Panasonic using GT12 for the period from October 1, 2010 through March 31, 2013. ABeam M&A Consulting used the financial data of Panasonic as of September 30, 2010, reviewed additional material information (including without limitation matters that were resolved, or were planned to be resolved, in Panasonic board of director meetings), as confirmed in discussions with officers of SANYO, that occurred after September 30, 2010 until December 17, 2010 and used market prices from September 21, 2010 to December 17, 2010 and other market information.

ABeam M&A Consulting calculated the resulting exchange ratio by using the net present values of projected free cash flows of Panasonic and 138 yen for SANYO’s share value. In making these calculations, ABeam M&A Consulting used the implied terminal values based on projections for the businesses of Panasonic including perpetual growth rates and EBITDA multiples. These values were discounted to implied present values using various discount rates based upon an analysis of the weighted average cost of capital (“WACC”).

For purposes of its analysis, ABeam M&A Consulting used a range for WACC and EBITDA multiple for the whole of Panasonic. Additionally, to perform a sum-of-the-parts analysis, ABeam M&A Consulting divided

 

(1) Since TOKEN CORPORATION closes its books at the end of April, EBITDA for LTM ending October 31, 2010, and EBITDA for fiscal years ending April 30, 2011, April 30, 2012, and April 30, 2013 were used as substitutes.

 

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the businesses of Panasonic into various parts and used various WACCs, and growth rates in relation to such divided businesses. The categorized businesses of Panasonic are as follows:

Panasonic

 

   

Digital AVC Networks, Home Appliances, Other

 

   

Components and Devices (Semiconductor)

 

   

Components and Devices (Energy)

 

   

Components and Devices (PED)

 

   

PEW

 

   

PanaHome

 

   

SANYO

For the whole of Panasonic, ABeam M&A Consulting used a range for the WACC and EBITDA multiple, and a single growth rate, as follows:

 

Business Line

   WACC      Growth Rate  

Whole Company

     5.16% to 6.16%         0

 

Business Line

   EBITDA Multiple  

Whole Company

     4.2x - 5.2x   

For the sum-of-the-parts analysis, ABeam M&A Consulting divided the businesses of Panasonic and used the following WACC ranges and growth rates:

 

Business Line

   WACC      Growth Rate  

Digital AVC Networks, Home Appliances, Other

     5.16% to 6.16%         0

Components and Devices (Semiconductor)

     5.67% to 6.67%         0

Components and Devices (Energy)

     6.54% to 7.54%         1

Components and Devices (PED)

     6.96% to 7.96%         0

PEW

     4.95% to 5.95%         0

PanaHome

     5.63% to 6.63%         0

SANYO

     5.84% to 6.84%         0

All of the valuation ranges for the respective business lines were combined to calculate a sum-of-the-parts enterprise value range for Panasonic. The enterprise values were then adjusted for indebtedness, net of cash and cash equivalents, non-controlling interests and certain other items that have debt-like characteristics, based on financial information as of September 30, 2010 or the most recently available information. Non-controlling interests used in this calculation were also adjusted as deemed appropriate by ABeam M&A Consulting.

Based on the foregoing, ABeam M&A Consulting calculated a range of the resulting share exchange ratio as follows using Panasonic’s share value and 138 yen for SANYO’s share value:

 

     Resulting Exchange
Ratio
 

Perpetual Growth Method

     0.038 ~ 0.048   

EBITDA Multiple Method

     0.052 ~ 0.063   

 

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2. SANYO

Market Price Analysis

ABeam M&A Consulting reviewed the average closing trading prices and value weighted average prices (“VWAP”) for the period commencing on July 30, 2010 (the business day immediately following July 29, 2010 on which the press release by Panasonic titled “Panasonic Announces Commencement of Tender Offer for Shares of Common Stock of SANYO” was released), and for the periods of three month and one month on and until December 17, 2010, which is the calculation base date, and the closing trading price on the calculation base date for Panasonic’s common stock and SANYO’s common stock on the first section of the Tokyo Stock Exchange. Based on such review, ABeam M&A Consulting calculated the resulting exchange ratios as follows:

 

Average Closing Trading Prices and VWAP

  

Periods

   Resulting Exchange Ratio  

Calculation Base Date

   December 17, 2010      0.116   

1 Month Average

   November 18, 2010 to December 17, 2010      0.114   

3 Month Average

   September 21, 2010 to December 17, 2010      0.115   

July 30 to Calculation Base Date

   July 30, 2010 to December 17, 2010      0.119   

Similar Companies Comparison Analysis

ABeam M&A Consulting used multiples of EBITDA and multiples of net income for the similar companies comparison analysis.

To calculate the EBITDA multiples, ABeam M&A Consulting reviewed and compared certain financial information of SANYO, as confirmed in discussions with officers of SANYO, to the corresponding financial information of the following publicly traded companies in the electronics industry in Japan. These companies were: ALPS ELECTRIC CO., LTD., Elpida Memory Inc., FUJITSU LIMITED, GS Yuasa Corporation, Hitachi, Ltd., KANEKA CORPORATION, KYOCERA CORPORATION, MABUCHI MOTOR CO., LTD., MINEBEA CO., LTD., Mitsubishi Electric Corporation, Murata Manufacturing Co., Ltd., NICHICON CORPORATION, NIDEC CORPORATION, NIPPON CHEMI-CON CORPORATION, ROHM COMPANY LIMITED, Sharp Corporation, Shin-Kobe Electric Machinery Co., Ltd., SONY CORPORATION, TAIYO YUDEN CO., LTD., TDK CORPORATION, The Furukawa Battery Co., Ltd., and TOSHIBA CORPORATION.

To calculate net income multiples, ABeam M&A Consulting reviewed and compared certain financial information of SANYO, as confirmed in discussions with officers of SANYO, to the corresponding financial information of the following publicly traded companies in the consumer electronics industry in Japan. These companies were: Hitachi, Ltd., Mitsubishi Electric Corporation, Sharp Corporation, SONY CORPORATION and TOSHIBA CORPORATION.

Although none of the selected companies is directly comparable to SANYO, the companies included were chosen because they are publicly traded companies with operations that, for the purposes of ABeam M&A Consulting’s analysis, may be considered similar to certain operations of SANYO.

For the EBITDA multiples, ABeam M&A Consulting used the selected publicly traded companies’ average EBITDA multiples. The EBITDA multiples of each selected publicly traded company was calculated by dividing the enterprise values based on, among other things, the average closing trading prices from September 21, 2010 to December 17, 2010 by each selected publicly traded company’s EBITDA for the LTM ending September 30, 2010 and EBITDA estimated by IBES and Toyo Keizai for the fiscal years ending March 31, 2011, March 31, 2012 and March 31, 2013.

For the net income multiples, ABeam M&A Consulting used the selected publicly traded companies’ average net income multiples. The net income multiples of each selected publicly traded company was calculated by dividing the market values based on, among other things, the average closing trading prices from September 21, 2010 to December 17, 2010 by each selected publicly traded company’s net income estimated by IBES for the fiscal years ending March 31, 2011, March 31, 2012 and March 31, 2013.

 

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ABeam M&A Consulting calculated the above-mentioned financial multiples of the selected companies, and calculated the resulting exchange ratio using Panasonic’s share value (as stated above in the similar companies comparison analysis in relation to Panasonic) and SANYO’s share value as follows:

 

     Multiple Range  for
Panasonic
     Multiple Range  for
SANYO
     Resulting  Exchange
Ratio
 

EBITDA Multiple

     4.7x - 5.6x         4.9 - 5.9x         0.037 ~ 0.056  

Net Income Multiple(1)

     13.4x - 21.9x         13.4x - 21.9x         0.064 ~ 0.084  

 

(1) The valuations of the LTM and the fiscal year ending March 31, 2011 were not included in the calculations due to the temporary nature of the expenses related to the reorganization of Panasonic.

Discounted Cash Flow Analysis

ABeam M&A Consulting performed a discounted cash flow analysis on Panasonic using GT12 and on SANYO using SANYO’s projections including the Synergy Estimate, for the period from October 1, 2010 through March 31, 2013. ABeam M&A Consulting used the financial data of Panasonic and SANYO as of September 30, 2010, reviewed additional material information (including without limitation matters that were resolved, or were planned to be resolved, in Panasonic and SANYO board of director meetings), as confirmed in discussions with officers of SANYO, that occurred after September 30, 2010 until December 17, 2010 and used market prices from September 21, 2010 to December 17, 2010 and other market information.

ABeam M&A Consulting calculated the resulting exchange ratio by using the net present values of projected free cash flows of Panasonic and SANYO. In making these calculations, ABeam M&A Consulting used the implied terminal values based on projections for the businesses of Panasonic and SANYO including perpetual growth rates and EBITDA multiples. These values were discounted to implied present values using various discount rates based upon an analysis of the WACC.

For purposes of its analysis, ABeam M&A Consulting used a range for WACC and EBITDA multiple for the whole of each of Panasonic and SANYO. Additionally, to perform a sum-of-the-parts analysis, ABeam M&A Consulting divided the businesses of Panasonic and SANYO into various parts and used various WACCs, and growth rates in relation to such divided businesses (the categorized businesses, WACCs, Growth rate and EBITDA multiples of Panasonic are stated above in the discounted cash flow analysis in relation to Panasonic). The categorized businesses of SANYO are as follows:

SANYO

 

   

Consumer Electronics

 

   

Solar

 

   

Mobile Energy

 

   

Electronic Devices

 

   

Semiconductor

 

   

Head Office

For the whole of SANYO, ABeam M&A Consulting used a range for the WACC and EBITDA multiple, and a single growth rate as follows:

 

Business Line

   WACC      Growth Rate  

Whole Company

     5.22% to 6.22%         0

 

Business Line

   EBITDA Multiple  

Whole Company

     4.4x - 5.4x   

 

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For the sum-of-the-parts analysis, ABeam M&A Consulting divided the businesses of SANYO and used the following WACC ranges and growth rates:

 

Business Line

   WACC      Growth Rate  

Consumer Electronics

     5.22% to 6.22%         0

Solar

     5.73% to 6.73%         2

Mobile Energy

     6.57% to 7.57%         2

Electronic Devices

     6.99% to 7.99%         0

Semiconductor

     5.72% to 6.72%         0

Head Office

     5.22% to 6.22%         0

All of the valuation ranges for the respective business lines were combined to calculate a sum-of-the-parts enterprise value range for each of Panasonic and SANYO. The enterprise values were then adjusted for indebtedness, net of cash and cash equivalents, non-controlling interests and certain other items that have debt-like characteristics, based on financial information as of September 30, 2010 or the most recently available information. Non-controlling interests used in this calculation were also adjusted as deemed appropriate by ABeam M&A Consulting.

Based on the foregoing, ABeam M&A Consulting calculated a range of the resulting share exchange ratio as follows using Panasonic’s share value and SANYO’s share value:

 

     Resulting  Exchange
Ratio
 

Perpetual Growth Method

     0.032 ~ 0.048  

EBITDA Multiple Method

     0.038 ~ 0.047  

ABeam M&A Consulting’s opinion is provided to the board of directors of SANYO and addresses only the fairness, from a financial point of view, to the shareholders of SANYO other than Panasonic, etc. of the Share Exchange Ratio. ABeam M&A Consulting’s opinion to the board of directors of SANYO was intended solely for the review of the Board of Directors of SANYO in its determination of whether to adopt a resolution to approve the Share Exchange and was one of many factors taken into consideration by the board of directors of SANYO in making its determination to approve the Share Exchange. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon projections of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of SANYO, Panasonic, ABeam M&A Consulting or any other person assumes any responsibility if future results are materially different from those projected. ABeam M&A Consulting does not express any opinion regarding the fairness of the share exchange ratio between the Panasonic’s common stock and PEW’s common stock as set forth in the share exchange agreement between Panasonic and PEW. ABeam M&A Consulting’s opinion was based on financial, economic, market and other conditions as they existed on the date of the opinion, and relies upon information available to ABeam M&A Consulting as of the date of the opinion. ABeam M&A Consulting had limited involvement in the negotiations in connection with the agreements or any other matters related to the Share Exchange. Although ABeam M&A Consulting’s opinion may be affected by changes in future conditions, ABeam M&A Consulting did not assume any responsibility to modify, change or supplement its opinion.

ABeam M&A Consulting is a management consulting firm that is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions or providing management strategy. ABeam M&A Consulting has acted as a financial advisor to SANYO with respect to the proposed Share Exchange and will receive a fee from SANYO for its services, a substantial portion of which will become payable only if the proposed Share Exchange is executed. In addition, SANYO has agreed to indemnify ABeam M&A Consulting for certain liabilities arising out of ABeam M&A Consulting’s engagement. ABeam M&A

 

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Consulting has also provided other financial services to SANYO within the past two years and received fees for such services. However, ABeam M&A Consulting has not provided any material financial services to Panasonic within the past two years. ABeam M&A Consulting does not trade or hold any shares or other securities of Panasonic or SANYO for its own account or for the account of customers or other third parties. ABeam M&A Consulting’s opinion has been approved for issuance by ABeam M&A Consulting’s Opinion Committee.

Mitsubishi UFJ Morgan Stanley

SANYO retained Mitsubishi UFJ Morgan Stanley to provide financial advisory services in connection with the Share Exchange and to render a financial opinion in connection with the Share Exchange under the Company Law between Panasonic and SANYO. SANYO selected Mitsubishi UFJ Morgan Stanley to act as its financial advisor based on Mitsubishi UFJ Morgan Stanley’s qualifications, experience, reputation and its knowledge of the business and affairs of SANYO. At a meeting of the SANYO board of directors on December 21, 2010, Mitsubishi UFJ Morgan Stanley delivered to SANYO’s board of directors Mitsubishi UFJ Morgan Stanley’s written opinion dated December 20, 2010, that, as of such date, based on and subject to the various assumptions, limitations and qualifications set forth in its opinion, the Share Exchange Ratio pursuant to the Share Exchange Agreement was fair, from a financial point of view, to the holders of shares of common stock of SANYO other than Panasonic.

The original written opinion of Mitsubishi UFJ Morgan Stanley dated December 20, 2010 delivered to the board of directors of SANYO was prepared in Japanese. The full text of an English translation of the Mitsubishi UFJ Morgan Stanley opinion is attached to this document as Appendix C. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Mitsubishi UFJ Morgan Stanley in rendering its opinion. You are urged to read the entire opinion carefully. Mitsubishi UFJ Morgan Stanley’s opinion is directed to SANYO’s board of directors and addresses only the fairness from a financial point of view of the Share Exchange Ratio pursuant to the Share Exchange Agreement to holders of shares of common stock of SANYO as of the date of the opinion. The opinion does not address any other aspects of the transaction and does not constitute a recommendation to any shareholders of SANYO, Panasonic or PEW as to how such shareholder should vote or act on any matter at any special meeting with respect to the Share Exchange and the Panasonic-PEW Share Exchange.

In connection with rendering its opinion, Mitsubishi UFJ Morgan Stanley, among other things:

 

   

reviewed certain publicly available financial statements and other business and financial information of SANYO, Panasonic, PEW, and their major subsidiaries, respectively;

 

   

reviewed certain internal financial statements and other financial and operating data concerning SANYO, Panasonic, and their major subsidiaries, respectively;

 

   

reviewed certain financial projections prepared by the managements of SANYO and Panasonic, respectively;

 

   

reviewed information relating to certain strategic, financial and operational benefits anticipated from the Share Exchange and the Panasonic-PEW Share Exchange prepared by the management of Panasonic;

 

   

discussed the past and current operations and financial condition and the prospects of SANYO and its major subsidiaries, including information relating to certain strategic, financial and operational benefits anticipated from the Share Exchange and the Panasonic-PEW Share Exchange, with senior executives of SANYO;

 

   

discussed the past and current operations and financial condition and the prospects of Panasonic and its major subsidiaries, including information relating to certain strategic, financial and operational benefits anticipated from the Share Exchange and the Panasonic-PEW Share Exchange, with senior executives of Panasonic;

 

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reviewed the pro forma impact of the Share Exchange and the Panasonic-PEW Share Exchange on Panasonic’s earnings per share, cash flow, consolidated capitalization and financial ratios;

 

   

reviewed the reported prices and trading activity for common stock of SANYO, Panasonic, and PEW, respectively;

 

   

compared the financial performance of SANYO, Panasonic and PEW and the prices and trading activity of common stock of SANYO, Panasonic and PEW with that of certain other publicly-traded companies comparable with SANYO, Panasonic and PEW, respectively, and their securities;

 

   

reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;

 

   

participated in certain discussions and negotiations on the Share Exchange among representatives of SANYO and Panasonic;

 

   

reviewed the accounting, tax and legal due diligence reports relating to Panasonic and its major subsidiaries prepared by experts (“the Due Diligence Reports”);

 

   

reviewed the Share Exchange Agreement and the Panasonic-PEW Share Exchange Agreement substantially in the form of the drafts dated December 17, 2010 and certain related documents; and

 

   

performed such other analyses and considered such other factors as Mitsubishi UFJ Morgan Stanley deemed appropriate.

Mitsubishi UFJ Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to it by SANYO and Panasonic, and formed a substantial basis for its opinion. With respect to the financial projections, including information relating to certain strategic, financial and operational benefits anticipated from the Share Exchange and the Panasonic-PEW Share Exchange, Mitsubishi UFJ Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best available estimates and judgments of the respective managements of SANYO and Panasonic of the future financial performance of SANYO and Panasonic. In addition, Mitsubishi UFJ Morgan Stanley assumed that the Share Exchange and the Panasonic-PEW Share Exchange would be consummated in accordance with the terms set forth in the Share Exchange Agreement and the Panasonic-PEW Share Exchange Agreement, respectively, without any waiver, amendment or delay of any terms or conditions, including, among other things, that the Share Exchange and the Panasonic-PEW Share Exchange would each be treated as tax-free reorganizations and/or exchanges, pursuant to the Corporation Tax Act. Mitsubishi UFJ Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed Share Exchange and Panasonic-PEW Share Exchange, no delays, limitations, conditions or restrictions would be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the proposed transactions. Mitsubishi UFJ Morgan Stanley is not a legal, tax or environmental advisor. Mitsubishi UFJ Morgan Stanley is a financial advisor only and has relied upon, without independent verification, the assessment of SANYO and Panasonic and their legal or tax advisors with respect to legal, tax or environmental matters. Mitsubishi UFJ Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of SANYO’s officers, directors or employees, or any class of such persons, relative to the consideration to be received by the holders of shares of common stock of SANYO in the Share Exchange. Mitsubishi UFJ Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of SANYO or Panasonic, nor was Mitsubishi UFJ Morgan Stanley furnished with any such appraisals. Mitsubishi UFJ Morgan Stanley expressed no opinion as to the fairness from a financial point of view of either the Exchange Ratio or the Panasonic-PEW share exchange ratio to the holders of shares of common stock of PEW, nor did Mitsubishi UFJ Morgan Stanley express any opinion as to the fairness of the Panasonic-PEW share exchange ratio to the holders of shares of common stock of SANYO, or the fairness of the Exchange Ratio relative to the Panasonic-PEW share exchange ratio. In addition, Mitsubishi UFJ Morgan Stanley expressed no opinion as to the fairness from a financial point of view of the purchase price of 138 yen per share of SANYO common stock under the tender offer by Panasonic to acquire all shares of common stock of SANYO that Panasonic did not already own, which

 

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was announced on July 29, 2010 and was implemented in the period from August 23, 2010 through October 6, 2010, to the holders of shares of common stock of SANYO. Further, Mitsubishi UFJ Morgan Stanley’s opinion did not in any manner address the prices at which common stock of Panasonic would trade following consummation of the Share Exchange and the Panasonic-PEW Share Exchange and Mitsubishi UFJ Morgan Stanley expressed no opinion or recommendation as to how the shareholders of SANYO, Panasonic or PEW should vote at the respective shareholders’ meetings, if any, to be held in connection with the Share Exchange and the Panasonic-PEW Share Exchange. Mitsubishi UFJ Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Mitsubishi UFJ Morgan Stanley as of the date of the opinion. Events occurring after the date of the opinion may affect Mitsubishi UFJ Morgan Stanley’s opinion and the assumptions used in preparing it, and Mitsubishi UFJ Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion. Mitsubishi UFJ Morgan Stanley’s opinion was approved by a committee of Mitsubishi UFJ Morgan Stanley’s investment banking and other professionals in accordance with its customary practice.

The following is a brief summary of the material financial analyses performed by Mitsubishi UFJ Morgan Stanley in connection with the preparation of its written opinion letter dated December 20, 2010. The following summary includes information presented in tabular format. In order to understand fully the financial analyses used by Mitsubishi UFJ Morgan Stanley, these tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The analyses listed in the tables and described below must be considered as a whole; considering any portion of such analyses and the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Mitsubishi UFJ Morgan Stanley’s financial opinion.

Historical Share Exchange Ratio Analysis. Mitsubishi UFJ Morgan Stanley reviewed the share exchange ratios of the recent trading performance of SANYO common shares and Panasonic common shares for December 17, 2010 as a record date (“Record Date 1”) as well as July 28, 2010, the last trading day prior to the announcement about the tender offer for SANYO shares, the tender offer for PEW shares, the Share Exchange and the Panasonic-PEW Share Exchange (collectively, the “Transaction”), as another record date (“Record Date 2”). Mitsubishi UFJ Morgan Stanley used the closing share price as of each of Record Date 1 and Record Date 2 and the average closing share prices during each of the one (1) month and three (3) month periods prior to and including Record Date 1 and Record Date 2, respectively, and compared the share exchange ratios with the Share Exchange Ratio. The share exchange ratios are summarized in the table below.

 

     Historical Share Exchange Ratio  

Record Date 1

     0.116   

1 month average for Record Date 1

     0.114   

3 month average for Record Date 1

     0.115   

Record Date 2

     0.101   

1 month average for Record Date 2

     0.100   

3 month average for Record Date 2

     0.106   

Comparable Companies Analysis. Mitsubishi UFJ Morgan Stanley reviewed and compared certain financial information for SANYO and Panasonic corresponding to financial information, ratios and public market multiples for the following publicly traded companies that share similar business characteristics with (i) the entire business of each of SANYO and Panasonic (“Consolidated Analysis”) and (ii) the major business lines of each of SANYO and Panasonic (“Sum-of-the-Parts Analysis”). The characterization of business line used for the purpose of this analysis does not necessarily correspond to any segment information prepared by the respective companies for purpose of their public financial disclosures in Japan, or to any U.S. GAAP segment information that appears elsewhere in this prospectus.

 

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SANYO

Consolidated Analysis

 

   

SONY CORPORATION

 

   

Sharp Corporation

 

   

CASIO COMPUTER CO., LTD.

Sum-of-the-Parts Analysis

Lithium Ion Battery:

 

   

LG Chem Ltd.

 

   

BYD Company Limited.

 

   

SAMSUNG SDI CO., LTD.

 

   

A123 Systems, Inc.

Solar Battery:

 

   

TRINA SOLAR LIMITED

 

   

Yingli Green Energy Holding Company Limited

 

   

Suntech Power Holdings Co., Ltd.

 

   

Sunpower Corporation

 

   

JA Solar Holdings Co., Ltd.

 

   

Q-Cells SE

Electric Device:

 

   

KYOCERA CORPORATION

 

   

NIDEC CORPORATION

 

   

Murata Manufacturing Co., LTD.

 

   

ALPS ELECTRIC CO., LTD.

 

   

NICHICON CORPORATION

 

   

NIPPON CHEMI-CON CORPORATION

Digital System:

 

   

Hon Hai Precision Industry Co., Ltd.

 

   

FLEXTRONICS INTERNATIONAL LTD.

 

   

Ability Enterprise Co., Ltd.

 

   

Altek Corporation

Commercial:

 

   

DAIKIN INDUSTRIES, LTD.

 

   

HOSHIZAKI ELECTRIC CO., LTD.

 

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Consumer Electronics:

 

   

AB Electrolux

 

   

Whirlpool Corporation

 

   

PIONEER CORPORATION

 

   

Indesit Company S.p.A.

Panasonic

Consolidated Analysis

 

   

Samsung Electronics Co., Ltd.

 

   

SONY CORPORATION

 

   

Koninklijke Philips Electronics N.V.

 

   

LG Electronics Inc.

 

   

Sharp Corporation

Sum-of-the-Parts Analysis

Digital AVC Networks:

 

   

Samsung Electronics Co., Ltd.

 

   

SONY CORPORATION

 

   

Koninklijke Philips Electronics N.V.

 

   

LG Electronics Inc.

 

   

Sharp Corporation

Home Appliances:

 

   

Samsung Electronics Co., Ltd.

 

   

LG Electronics Inc.

 

   

AB Electrolux

 

   

Whirlpool Corporation

 

   

Indesit Company S.p.A.

Components and Devices:

 

   

TEXAS INSTRUMENTS INCORPORATED

KYOCERA CORPORATION

 

   

Murata Manufacturing Co., Ltd.

 

   

TDK CORPORATION

 

   

Infineon Technologies AG

 

   

STMicroelectronics N.V.

 

   

Renesas Electronics Corporation

 

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PanaHome:

 

   

DAIWA HOUSE INDUSTRY CO., LTD.

 

   

Sekisui House, Ltd.

PEW:

 

   

JS Group Corporation

 

   

TOTO LTD.

 

   

ACUITY BRANDS, INC.

 

   

ZUMTOBEL AG

 

   

DAIKEN CORPORATION

 

   

NICHIHA CORPORATION

For each of these companies, Mitsubishi UFJ Morgan Stanley calculated the ratio of aggregate value, defined as market capitalization plus total debt less cash and cash equivalents including marketable securities, to estimated earnings before interest, taxes, depreciation and amortization, which is referred to as “EBITDA”, for the fiscal years ending March 31, 2011 and March 31, 2012, annualized if necessary, based on the most recent publicly available information and closing prices as of December 17, 2010. Mitsubishi UFJ Morgan Stanley selected representative ranges of financial multiples of the comparable companies as follows.

 

     Aggregate Value to
EBITDA multiples
(March 31, 2011)
     Aggregate Value to
EBITDA multiples
(March 31, 2012)
 

SANYO:

     

Consolidated Analysis

     5.0x - 6.0x         4.5x - 5.5x   

Sum-of-the-Parts Analysis

     

Lithium Ion Battery

     8.0x - 9.0x         7.5x - 8.5x   

Solar Battery

     4.5x - 5.5x         4.0x - 5.0x   

Electric Device

     5.5x - 6.5x         5.0x - 6.0x   

Digital System

     4.5x - 5.5x         4.0x - 5.0x   

Commercial

     5.0x - 6.0x         4.0x - 5.0x   

Consumer Electronics

     4.0x - 5.0x         3.5x - 4.5x   

Panasonic:

     

Consolidated Analysis

     5.5x - 6.5x         4.5x - 5.5x   

Sum-of-the-Parts Analysis

     

Digital AVC Networks

     5.5x - 6.5x         4.5x - 5.5x   

Home Appliances

     5.5x - 6.5x         5.5x - 6.5x   

Components and Devices

     5.0x - 6.0x         4.5x - 5.5x   

SANYO(1)

     5.6x - 6.6x         5.1x - 6.1x   

PanaHome

     6.5x - 7.5x         6.0x - 7.0x   

PEW

     6.5x - 7.5x         5.5x - 6.5x   

 

(1) The weighted average of aggregate value to EBITDA multiples for each applicable business line of SANYO were applied to the aggregate value to EBITDA multiples for SANYO as one of the business lines of Panasonic for each of the fiscal year ending March 31, 2011 and March 31, 2012.

 

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Mitsubishi UFJ Morgan Stanley applied the ranges of multiples derived from the Consolidated Analysis to Institutional Broker Estimate System (“I/B/E/S”) estimates for SANYO and Panasonic as of December 20, 2010, and the ranges of multiples derived from the Sum-of-the-Parts Analysis to each of SANYO’s and Panasonic’s projections provided by the managements of SANYO and Panasonic respectively. Based on this analysis, Mitsubishi UFJ Morgan Stanley derived a range of share exchange ratios of 0.032 to 0.071:

No company analyzed in the comparable companies analysis is identical to SANYO or Panasonic. In evaluating the comparable companies, Mitsubishi UFJ Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of SANYO or Panasonic, such as the impact of competition on the business of SANYO, Panasonic or the industry generally, industry growth and the absence of any material adverse change in the financial condition of SANYO, Panasonic or the industry or in the financial markets in general, which could affect the public trading value of the companies. Mathematical analysis (such as determining the average or median) is not itself a meaningful method of using data of the selected companies.

Discounted Cash Flow Analysis. Mitsubishi UFJ Morgan Stanley performed a discounted cash flow analysis to estimate a range of present values per share of common stock of SANYO and Panasonic, respectively, assuming the companies continued to operate as stand-alone entities. This range was determined by adding (i) the sum of the discounted net present value of the stream of the unlevered free cash flows that each applicable business line of SANYO and Panasonic is expected to generate over the next five years ending March 31, 2016 and (ii) the discounted net present value of the terminal value, calculated either by applying a range of aggregate value to EBITDA multiples to the normalized EBITDA of each applicable business line of SANYO and Panasonic for the fiscal year ending March 31, 2016 or by applying a range of perpetual growth rates to the normalized unlevered free cash flow of each applicable business line of SANYO and Panasonic for the fiscal year ending March 31, 2016. Financial projections used in the discounted cash flow analysis were based on each of SANYO’s and Panasonic’s projections provided by the managements of SANYO and Panasonic, respectively. The cash flow stream and terminal values were discounted to present value using a range of discount rates for each applicable business line of SANYO and Panasonic, which were chosen by Mitsubishi UFJ Morgan Stanley based upon its risk characteristics and an analysis of weighted average costs of capital, or WACC.

The range of aggregate value to EBITDA multiples and perpetual growth rate for calculation of the terminal value and discount rates applied to each applicable business line of SANYO and Panasonic are as follows.

SANYO:

 

Business Line

   Aggregate Value to
EBITDA multiples
     Perpetual
Growth  Rates
     Discount Rates  

Lithium Ion Battery

     8.0x - 9.0x         1.00% - 1.50%         6.0% - 7.0%   

Solar Battery

     4.5x - 5.5x         1.00% - 1.50%         8.5% - 9.5%   

Electric Device

     5.5x - 6.5x         0.00% - 0.50%         6.0% - 7.0%   

Digital System

     4.5x - 5.5x         0.00% - 0.50%         7.5% - 8.5%   

Commercial

     5.0x - 6.0x         0.00% - 0.50%         6.5% - 7.5%   

Consumer Electronics

     4.0x - 5.0x         0.00% - 0.50%         6.0% - 7.0%   

Panasonic:

 

Business Line

   Aggregate Value to
EBITDA multiples
     Perpetual
Growth  Rates
     Discount Rates  

Digital AVC Networks

     5.5x - 6.5x         0.00% - 0.50%         5.5% - 6.5%   

Home Appliances

     5.5x - 6.5x         0.00% - 0.50%         6.0% - 7.0%   

Components and Devices

     5.0x - 6.0x         0.00% - 0.50%         7.0% - 8.0%   

SANYO(1)

     5.6x - 6.6x         0.42% - 0.92%         6.5% - 7.5%   

PanaHome

     6.5x - 7.5x         -0.25% - 0.25%         5.0% - 6.0%   

PEW

     6.5x - 7.5x         -0.25% - 0.25%         5.0% - 6.0%   

 

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(1) The weighted average of aggregate value to EBITDA multiples, perpetual growth rates and discount rates for each applicable business line of SANYO were applied to the aggregate value to EBITDA multiples, perpetual growth rates and discount rates for SANYO as one of the business lines of Panasonic.

All of the valuation ranges for the applicable business lines were combined to calculate a sum-of-the-parts aggregate value range for each of SANYO and Panasonic. The respective aggregate values were then adjusted for indebtedness, net of cash and cash equivalents including marketable securities, minority interests based on the estimated balance sheets as of March 31, 2011 and certain other items including adjustments based on the Due Diligence Reports. Based on this analysis, Mitsubishi UFJ Morgan Stanley derived a range of share exchange ratios of 0.027 to 0.053.

Precedent Transaction Analysis. Taking into account the fact that Panasonic had filed the shelf registration statement for offerings of shares of common stock in an amount up to JPY 500 billion with the Ministry of Finance on July 29, 2010, the date of the announcement of the Transaction, Mitsubishi UFJ Morgan Stanley performed an analysis of precedent “Share Exchange Only” transactions in Japan announced since 2009 where the acquiring company (i) had already held a more than 50.0% and equal to or less than 66.6% stake in a target company which had recorded net losses for the two consecutive fiscal years prior to the announcement, and (ii) turned the target company into a wholly-owned subsidiary. Furthermore, given the fact that Panasonic announced that it withdrew the shelf registration based on the results of the tender offers, Mitsubishi UFJ Morgan Stanley performed an analysis of “Tender Offer and subsequent Share Exchange” transactions in Japan announced since 2006 where the acquiring company (i) had already held a more than 50.0% and equal to or less than 66.6% stake in a target company which had recorded net losses for the two consecutive fiscal years prior to the announcement or recorded net losses before the fiscal year of the deal announcement and also announced the possibility of net losses for the fiscal year of the deal announcement, and (ii) turned the target company into a wholly-owned subsidiary. The transactions selected were as follows:

“Share Exchange Only” Transactions:

 

Date Announced

  

Acquirer

  

Target

August 27, 2010

   SEGA SAMMY HOLDINGS INC.    SEGA TOYS CO., LTD.

August 27, 2010

   Kirin Holdings Company, Limited    Mercian Corporation

February 24, 2010

   CANON ELECTRONICS INC.    E-SYSTEM CORPORATION

September 14, 2009

   Rengo Co., Ltd.    Nihon Matai Co., Ltd.

May 12, 2009

   KYOWA EXEO CORPORATION    KANAC Corporation

“Tender Offer and Subsequent Share Exchange” Transactions:

 

Date Announced

  

Acquirer

  

Target

June 10, 2008

   NOMURA Co., Ltd.    TESCO CO., LTD.

February 14, 2008

   DC CO., LTD.    EBATA Corporation

July 27, 2007

   Marubeni Corporation    MARUBENI INFOTEC CORPORATION

April 13, 2007

   OUG Holdings Inc.    DAIEI TAIGEN CO., LTD.

 

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For each of these selected transactions, Mitsubishi UFJ Morgan Stanley calculated the premium or discount to the closing market price of the target’s common stock prior to the date of the announcement of the transaction, as well as the premium or discount to the average closing price for the one (1) month and three (3) month periods prior to each such date. The following table sets forth the results of this analysis:

 

     Premium (Discount) to  
     Last Closing
Price Prior to

the date of
Announcement
of Transaction
    One Month
Average Prior to

the date of
Announcement
of Transaction
    Three Month
Average Prior to

the date of
Announcement
of Transaction
 

“Share Exchange Only” Transactions:

      

Mean

     6.8     6.0     2.4

Median

     2.8     3.8     0.9

“Tender Offer and Subsequent Share Exchange” Transactions:

      

Mean

     28.0     27.3     26.8

Median

     26.7     24.1     23.1

Mitsubishi UFJ Morgan Stanley selected 5.0% to 25.0% as the representative range of the premium of the precedent transactions and applied it to the closing share price of SANYO as of Record Date 2 and the average closing share prices of SANYO during each of the one (1) month and three (3) month periods prior to and including Record Date 2. Based on this analysis, Mitsubishi UFJ Morgan Stanley derived a range of share exchange ratios of 0.103 to 0.136.

No company or transaction analyzed in the precedent transaction analysis is identical to SANYO, Panasonic or the Share Exchange. In evaluating the precedent transactions, Mitsubishi UFJ Morgan Stanley made judgments and assumptions with regard to general business, market and financial conditions and other matters, which are beyond the control of SANYO and Panasonic, such as the impact of competition on the business of SANYO, Panasonic or the industry generally, industry growth and the absence of any material adverse change in the financial condition of SANYO, Panasonic or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value of the transactions to which they are being compared.

Pro Forma Earnings Per Share Accretion/Dilution Analysis. Mitsubishi UFJ Morgan Stanley analyzed the pro forma impact of the Share Exchange and the Panasonic-PEW Share Exchange on Panasonic’s earnings per share (“EPS”), using the pre-tax synergies amounted to JPY 60 billion (the “Synergy”) for the fiscal year ending March 31, 2013 estimated by the managements of Panasonic as well as the net income of SANYO, Panasonic and PEW for the fiscal year ending March 31, 2012 through the fiscal year ending March 31, 2013 based on I/B/E/S estimates as of December 17, 2010. Mitsubishi UFJ Morgan Stanley calculated earnings per share by dividing net income by the estimated number of Panasonic shares outstanding as calculated based on the Share Exchange Ratio and the Panasonic-PEW share exchange ratio, and the number of shares outstanding of Panasonic, SANYO and PEW as of September 30, 2010.

This analysis indicates that with the assumption that 50% and 100% of the Synergy will be realized for the fiscal year ending March 31, 2012 and March 31, 2013, respectively, the combination of the Share Exchange and the Panasonic-PEW Share Exchange would be accretive to Panasonic’s EPS in each of the fiscal year ending March 31, 2012 and March 31, 2013. The analysis doesn’t include one-time charges and negative synergies estimated from the Share Exchange and the Panasonic-PEW Share Exchange.

General

In connection with the review of the Share Exchange by SANYO’s board of directors, Mitsubishi UFJ Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion.

 

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The preparation of a fairness opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Mitsubishi UFJ Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Mitsubishi UFJ Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Mitsubishi UFJ Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the range of valuations resulting from any particular analysis described above should not be taken to be Mitsubishi UFJ Morgan Stanley’s view of the actual value of SANYO, Panasonic, PEW or the resulting combined company. In performing its analyses, Mitsubishi UFJ Morgan Stanley made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of SANYO, Panasonic and PEW. Any estimates contained in Mitsubishi UFJ Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by these estimates.

Mitsubishi UFJ Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness of the Share Exchange Ratio pursuant to the Share Exchange Agreement from a financial point of view to the holders of shares of common stock of SANYO other than Panasonic, and in connection with the delivery by Mitsubishi UFJ Morgan Stanley of its opinion, dated December 20, 2010, to the SANYO board of directors. These analyses do not purport to be appraisals or to reflect the prices at which shares of common stock of SANYO or Panasonic might actually trade.

The Share Exchange Ratio was determined through arm’s length negotiations between SANYO and Panasonic and was approved by SANYO’s board of directors. Mitsubishi UFJ Morgan Stanley did not recommend any specific share exchange ratio to SANYO or its board of directors or that any specific share exchange ratio constituted the only appropriate share exchange ratio for the Share Exchange.

Mitsubishi UFJ Morgan Stanley’s opinion and its presentation to SANYO’s representatives was only one of many factors taken into consideration by SANYO’s board of directors in deciding to approve the Share Exchange. Consequently, the analyses as described above should not be viewed as determinative of the opinion of SANYO’s board of directors with respect to the Share Exchange Ratio or of whether SANYO’s board of directors would have been willing to agree to a different share exchange ratio. The foregoing summary describes the material analyses performed by Mitsubishi UFJ Morgan Stanley but does not purport to be a complete description of the analyses performed by Mitsubishi UFJ Morgan Stanley.

Mitsubishi UFJ Morgan Stanley and its affiliates (the “Group”) are a global financial services firm engaged in the banking (including financing for SANYO), securities, trust, investment management, credit services and other financial businesses (collectively, “Financial Services”). Its securities business is engaged in securities underwriting, trading, and brokerage activities, foreign exchange, commodities and derivatives trading, as well as providing investment banking, financing and financial advisory services. In the ordinary course of its underwriting, trading, brokerage and financing activities, the Group may at any time hold long or short positions, may provide Financial Services to SANYO, Panasonic, PEW or companies that may be involved in the Share Exchange or the Panasonic-PEW Share Exchange and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans of SANYO, Panasonic, PEW or any company that may be involved in the Share Exchange or the Panasonic-PEW Share Exchange, or in any currency or commodity that may be involved in the Share Exchange or the Panasonic-PEW Share Exchange, or in any related derivative instrument. The Group, its directors and officers may also at any time invest on a principal basis or manage funds that invest on a principal basis, in debt or equity securities of SANYO, Panasonic, PEW or any company that may be involved in the Share Exchange or the Panasonic-PEW Share Exchange, or in any currency or commodity that may be involved in the Share Exchange or the Panasonic-PEW Share Exchange, or in any related derivative instrument. Further, the Group may at any time carry out ordinary course broking activities for SANYO, Panasonic, PEW or any company that may be involved in the Share Exchange or the

 

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Panasonic-PEW Share Exchange. In the past, Mitsubishi UFJ Morgan Stanley has provided financial advisory services for SANYO and Panasonic and has received fees for the rendering of these services. The Group may also seek to provide such services to SANYO, Panasonic or their affiliates in the future and expects to receive fees for the rendering of these services.

Under the terms of its engagement letter, Mitsubishi UFJ Morgan Stanley provided SANYO with financial advisory services in connection with the Share Exchange for which it would be paid a customary fee by SANYO, which is contingent upon the closing of the Share Exchange. SANYO has also agreed to reimburse Mitsubishi UFJ Morgan Stanley for its expenses incurred in performing its services. In addition, SANYO agreed to indemnify Mitsubishi UFJ Morgan Stanley and its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Mitsubishi UFJ Morgan Stanley or any of its affiliates against certain liabilities and expenses, including certain liabilities under the U.S. federal securities laws, related to or arising out of Mitsubishi UFJ Morgan Stanley’s engagement.

Structure of the Share Exchange

The Share Exchange is expected to become effective on April 1, 2011. Under the terms of the Share Exchange approved by the boards of directors of Panasonic and SANYO, the following events will occur upon the effectiveness of the Share Exchange:

 

   

Shareholders of SANYO’s common stock (other than SANYO, with respect to its treasury shares, which will be cancelled, and Panasonic, with respect to shares of SANYO owned by it) as of the moment immediately preceding the Share Exchange will be allotted shares of Panasonic’s common stock in amounts based on the ratio of 0.115 Panasonic shares for one SANYO share, such amount (excluding any fraction of a share) to be reflected in Panasonic’s register of shareholders; and

 

   

Any fraction of a share of Panasonic’s common stock that would otherwise be allotted to former shareholders of SANYO will instead be cashed out as described in more detail below.

In accordance with the Company Law, SANYO shareholders will not receive any fractions of a share of Panasonic’s common stock in the Share Exchange. Instead, the shares representing the aggregate of all such fractions (in case where such aggregated shares still include any fraction less than one share, such fraction shall be rounded off) will be sold in the Japanese market or sold to Panasonic and the net cash proceeds from the sale will be distributed to the former holders of SANYO shares on a proportionate basis in accordance with their respective fractions.

If during the period after the execution of the Share Exchange Agreement and before the effective date of the Share Exchange, (i) a material change occurs in the financial conditions or management conditions of Panasonic or SANYO, (ii) a situation arises or is discovered that materially obstructs the implementation of the Share Exchange, or (iii) some other situation arises that makes it significantly difficult to achieve the purpose of the Share Exchange Agreement, Panasonic and SANYO may, upon consultation, change the contents of the Share Exchange Agreement such as the terms and conditions of the Share Exchange or cancel the Share Exchange.

Expiration of the Share Exchange Agreement

The Share Exchange Agreement shall cease to have any effect if, among others, the Share Exchange Agreement is not approved at the shareholders’ meeting of SANYO.

Description of Material Share Exchange Terms

SANYO Voting Matters

The close of business on January 12, 2011 has been fixed by the resolution of SANYO’s board of directors as the record date for determination of the holders of SANYO’s common stock entitled to exercise shareholders’

 

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rights at SANYO’s extraordinary general meeting. As of January 12, 2011, there were 6,141,456,040 shares of SANYO’s common stock issued and outstanding. See “Extraordinary General Meeting of SANYO Shareholders” for a more detailed description of the vote required, and the use and revocation of mail-in-ballots at the general meeting of shareholders.

Dissenters’ Appraisal Rights

Any SANYO shareholder (i) who notifies SANYO prior to the general meeting of shareholders of his or her intention to oppose the Share Exchange, and who votes against approval of the Share Exchange at the general meeting, or (ii) who is not entitled to vote at such general meeting of shareholders, and complies with the other procedures set forth in the Company Law and share handling regulations of SANYO (a “dissenting shareholder”) may demand that SANYO purchase his or her shares of SANYO’s common stock at the fair value. The failure of a shareholder who is entitled to vote at such general meeting of shareholders to provide such notice prior to the general meeting or to vote against approval of the Share Exchange at the general meeting will in effect constitute a waiver of the shareholder’s right to demand that SANYO purchase his or her shares of common stock at the fair value. The dissenting shareholder who has made such demand may withdraw such demand only if SANYO approves such withdrawal.

SANYO will give public notice to its shareholders announcing that SANYO intends to perform the Share Exchange and providing the name and address of Panasonic, no later than 20 days prior to the effective date of the Share Exchange (such public notice may be made prior to the date of the general meeting of shareholders). The demand referred to in the preceding paragraph must be made during the period from the day 20 days prior to the effective date of the Share Exchange to the date immediately preceding the effective date of the Share Exchange and should state the number of shares relating to such demand. The Company Law does not require any other statement in the demand. If the value of such shares is agreed upon between the dissenting shareholder and SANYO, then SANYO is required to make payment to such dissenting shareholder of the agreed value within 60 days of the effective date of the Share Exchange. If the dissenting shareholder and SANYO do not agree on the value of such shares within 30 days from the effective date of the Share Exchange, the shareholder or SANYO may, within 30 days after the expiration of such period, file a petition with the Osaka District Court for a determination of the value of his or her shares. SANYO is also required to make payment of statutory interest on such share value as determined by the court accruing from the expiration of the 60-day period referred to in the second preceding sentence. The transfer of shares will become effective on the effective date of the Share Exchange.

Dissenters’ appraisal rights for shareholders of a company becoming a wholly-owned subsidiary through a Share Exchange are set forth in Articles 785 and 786 of the Company Law. An English translation of these articles is included in this prospectus as Appendix A.

Status of Panasonic’s Common Stock under the Federal Securities Laws

The transfer of shares of Panasonic’s common stock in connection with the Share Exchange to United States holders of SANYO’s common stock has been registered under the United States Securities Act of 1933 (the “Securities Act”). Accordingly, there will be no restrictions under the Securities Act upon the resale or transfer of such shares by United States shareholders of SANYO except for those shareholders, if any, who are deemed to be “affiliates” of Panasonic, as such term is used in Rule 144 and Rule 145 under the Securities Act. Persons who may be deemed to be affiliates of Panasonic generally include individuals who, or entities that, directly or indirectly control, or are controlled by or are under common control with, Panasonic. With respect to those shareholders who may be deemed to be affiliates of Panasonic, Rule 144 and Rule 145 place certain restrictions on the offer and sale within the United States or to United States persons of Panasonic’s common stock that may be received by them pursuant to the Share Exchange. This prospectus does not cover resales of shares of Panasonic’s common stock received by any person who may be deemed to be an affiliate of Panasonic.

 

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Accounting Treatment

SANYO was a consolidated subsidiary of Panasonic prior to the Share Exchange as Panasonic had a controlling financial interest. Since the changes in Panasonic’s ownership interest do not result in a loss of control of SANYO, the Share Exchange will be accounted for by Panasonic in accordance with ASC 810 “Consolidation.” Under this U.S. GAAP guidance, changes in Panasonic’s ownership interest while Panasonic retains its controlling financial interest in SANYO will be accounted for as equity transactions. There will be no gain or loss recognition in the consolidated statements of operations or comprehensive income (loss) of Panasonic and the carrying amount of the noncontrolling interest shall be adjusted to reflect the change in Panasonic’s ownership interest in SANYO. Any difference between the fair value of the consideration paid by Panasonic and by which the noncontrolling interest is adjusted shall be recognized in Panasonic’s shareholders’ equity caption in Panasonic’s consolidated balance sheets.

Differences in Shareholders’ Rights

There are no material differences between or among the rights of shareholders of Panasonic’s common stock and SANYO’s common stock from a legal perspective.

Tax Consequences of the Share Exchange

Based on certain assumptions and subject to certain limited exceptions, the Share Exchange is expected to be a tax-free transaction for Japanese tax purposes for holders of shares of SANYO’s common stock who will be allotted shares of Panasonic’s common stock. As such, non-resident holders of shares of SANYO’s common stock will generally not recognize any gains or losses for Japanese tax purposes at the time of the Share Exchange. See “Taxation—Japanese Tax Consequences” for further discussion.

Panasonic expects that the Share Exchange to be a taxable event for U.S. federal income tax purposes. As a result, U.S. Holders will generally recognize a capital gain or loss measured by the difference between (i) the sum of (A) the fair market value (in U.S. dollars) of Panasonic’s common stock received in exchange for their SANYO’s shares and (B) any cash received in lieu of fractional shares of Panasonic’s common stock, and (ii) their tax basis in the shares of SANYO’s common stock they hold. Such capital gain or loss will be long-term capital gain or loss if, at the time of the exchange, their holding period in their shares of SANYO’s common stock exceeds one year. For further discussion, see “Taxation—Material U.S. Federal Income Tax Consequences” beginning on page 161.

Panasonic-PEW Share Exchange

The boards of directors of Panasonic and PEW have agreed to the Panasonic-PEW Share Exchange, pursuant to which each shareholder of PEW will receive 0.925 shares of Panasonic’s common stock for each share of PEW’s common stock that such shareholder holds. The terms of the Panasonic-PEW Share Exchange will be submitted to the shareholders’ meeting of PEW to be held on March 2, 2011. The completion of the Panasonic-PEW Share Exchange is not conditioned in any respect on the completion of the Share Exchange. If the Panasonic-PEW Share Exchange is completed, PEW will become a wholly-owned subsidiary of Panasonic on April 1, 2011.

 

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BUSINESS OF PANASONIC

History and Development of Panasonic

Panasonic (Address: 1006, Oaza Kadoma, Kadoma City, Osaka 571-8501, Japan. Phone: +81-6-6908-1121 / Agent: Mr. Ko Kaneko, President of Panasonic Finance (America), Inc.) was incorporated in Japan on December 15, 1935 under the laws of Japan as Matsushita Denki Sangyo Kabushiki Kaisha as the successor to an unincorporated enterprise founded in 1918 by the late Konosuke Matsushita. Mr. Matsushita led Panasonic with his corporate philosophy of contributing to the peace, happiness and prosperity of humankind through the supply of quality consumer electric and electronic goods. Panasonic’s business expanded rapidly with the recovery and growth of the Japanese economy after World War II, as it met rising demand for consumer electric and electronic products, starting with washing machines, black-and-white TVs and refrigerators. During the 1950s, Panasonic expanded its operations by establishing mass production and mass sales structures to meet increasing domestic demand, while also creating subsidiaries, making acquisitions and forming alliances. During the 1960s, Panasonic expanded its overseas businesses, and its products started obtaining worldwide recognition.

During the global recession caused by the first oil crisis in 1973, Panasonic strengthened its structure and overseas business relations. The advent and popularity of the video cassette recorder (VCR) from the late 1970s enabled Panasonic to receive worldwide recognition as a global consumer electronics manufacturer. In the 1980s, Panasonic further worked to evolve from a consumer products manufacturer to a comprehensive electronics products manufacturer, expanding its business in the areas of information and communications technology, industrial equipment and components and devices. Since the 1990s, Panasonic has been emphasizing technological development and the use of advanced technology in every phase of life. In particular, Panasonic has been expanding its development activities in such areas as next-generation audiovisual (AV) equipment, multimedia products, and advanced electronic components and devices, many of which incorporate digital technology.

In June 1995, Panasonic sold 80% equity interest in MCA (subsequently renamed Universal Studios, Inc.) which Panasonic purchased in December 1990, to The Seagram Company Ltd. (currently Vivendi Universal S.A.) for approximately $5.7 billion, leaving Panasonic with a minority interest. In February 2006, Panasonic sold the remaining shares to Vivendi Universal S.A.

In April 2000, Panasonic made two of its majority-owned subsidiaries, Matsushita Refrigeration Company and Wakayama Precision Company, into wholly-owned subsidiaries by means of share exchanges. As a result of the share exchanges, Panasonic issued 16,321,187 shares of its common stock to shareholders of the respective companies.

In June 2000, Kunio Nakamura became President of Panasonic and, under his leadership, Panasonic implemented structural reforms and growth strategies with an emphasis on enhancing growth potential, profitability and capital efficiency, thereby ensuring Panasonic’s continued contribution to society.

In April 2001, Panasonic absorbed Matsushita Electronics Corporation, its wholly-owned subsidiary, by merger to implement unified operational management in such key device areas as semiconductors and display devices.

In April 2002, Panasonic and Toshiba Corporation (Toshiba) separated their respective liquid crystal display (LCD) panel operations and established a joint venture company, Toshiba Matsushita Display Technology Co., Ltd. (TMD), for the development, manufacture and sale of LCD panels and next-generation display devices. Of the new company’s initial stated capital of 10 billion yen, 60% was invested by Toshiba and 40% by Panasonic.

As a drastic structural reform aimed at achieving new growth, Panasonic implemented share exchanges on October 1, 2002 with five of its majority-owned subsidiaries (Matsushita Communication Industrial Co., Ltd.,

 

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Kyushu Matsushita Electric Co., Ltd., Matsushita Seiko Co., Ltd., Matsushita Kotobuki Electronics Industries, Ltd. and Matsushita Graphic Communication Systems, Inc.) and transformed them into wholly-owned subsidiaries of Panasonic.

As an extension of this Groupwide reorganization, Panasonic transformed two of its majority-owned subsidiaries, Matsushita Electronic Components Co., Ltd. and Matsushita Battery Industrial Co., Ltd., into wholly-owned subsidiaries via share exchanges, effective April 1, 2003.

Upon the aforementioned Groupwide restructurings, in April 2003, to prepare a framework that enables each business domain company to implement autonomously responsible management, Panasonic established a new global consolidated management system that focuses on capital efficiency and cash flows.

Also on April 1, 2003, Panasonic launched another joint venture company with Toshiba, upon separating their respective cathode ray tube (CRT) businesses with the exception of domestic CRT manufacturing operations. Panasonic formerly accounted for the investment in the new company, Matsushita Toshiba Picture Display Co., Ltd. (MTPD) and its subsidiaries under the equity method, and began to consolidate MTPD on March 1, 2006 in accordance with Financial Accounting Standards Board (FASB) Interpretation No.46 (revised December 2003), “Consolidation of Variable Interest Entities” (FIN 46R), as a result of certain restructuring activities of MTPD. At March 31, 2006, Panasonic had a 64.5% equity interest in MTPD. At March 30, 2007, Panasonic acquired the remaining 35.5% equity interest in MTPD from Toshiba and MTPD was renamed MT Picture Display Co., Ltd.

Since fiscal 2003, Panasonic has been gradually shifting its focus from restructuring to growth. Panasonic made concerted efforts to enhance product competitiveness. V-products, which aim to capture leading shares in high-volume markets, made a significant contribution to overall business results.

In April 2003, Panasonic announced that it would position the Panasonic brand as a globally unified brand for overseas markets under the global brand slogan of “Panasonic ideas for life.” This new brand strategy conveys to customers all over the world a new image for Panasonic and its products, while further enhancing brand value.

In December 2003, Panasonic reached a basic agreement regarding a comprehensive business collaboration with its affiliate, Panasonic Electric Works Co., Ltd. (PEW), after which Panasonic initiated a tender offer for additional shares of PEW. As a result of the tender offer in which Panasonic purchased an additional 140,550 thousand shares of common stock of PEW at the total cost of 147 billion yen, PEW, PanaHome Corporation and their respective subsidiaries became consolidated subsidiaries of Panasonic in April 2004. For fiscal 2005, Panasonic and PEW integrated overlapping businesses in the area of electrical supplies, building materials and equipment, home appliances and industrial equipment, and reformed distribution channels to establish an optimized, customer-oriented operational structure. In fiscal 2006, Panasonic leveraged the strengths of both companies to achieve sales increases in Collaboration V-products including bathroom systems, modular kitchens and air purifiers.

In fiscal 2005, as part of business restructuring of its Group companies, power distribution equipment and monitoring and control system operations of Matsushita Industrial Information Equipment Co., Ltd. (MIIE) were transferred to PEW, while MIIE’s information machine business was shifted to Panasonic Communications Co., Ltd. Subsequently, MIIE was absorbed by Panasonic in April 2005, and no longer operates as a separate entity.

In June 2006, Fumio Ohtsubo became President of Panasonic. Under its new management, it has been making efforts to achieve global excellence, or in other words, to aim to earn the support of all its stakeholders worldwide by sustaining growth through continued innovation and ensuring sound business activities on a global basis.

 

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In July 2007, each of Victor Company of Japan, Limited (“JVC”), a consolidated subsidiary of Panasonic, KENWOOD and SPARX International (Hong Kong) Limited, an investment management company which belongs to a group of companies headed by SPARX Group Co., Ltd. adopted resolutions for, or affirmed, JVC’s issuance of 107,693,000 new shares of its common stock through third party allotments, and the new shares were subscribed by KENWOOD and the several investment funds managed by SPARX International (Hong Kong) Limited. JVC issued and allocated the new shares to KENWOOD and the SPARX funds on August 10, 2007. As a result, Panasonic’s shareholding in JVC decreased from 52.4% to 36.8%, and JVC became an associated company under the equity method from a consolidated subsidiary in the fiscal 2008 second quarter.

In February 2008, Panasonic finalized a definitive agreement with Hitachi, Ltd. related to comprehensive LCD panel business alliance under which it would acquire a majority voting interest in IPS Alpha Technology, Ltd. (“IPS Alpha”), which was owned by Hitachi Displays, Ltd. once certain conditions are satisfied. As a result, IPS Alpha became a consolidated subsidiary of Panasonic on March 31, 2008, in accordance with FIN 46R.

In April 2008, Matsushita Refrigeration Company was absorbed, and in October 2008, Matsushita Battery Industrial Co., Ltd. was absorbed, by Panasonic.

On October 1, 2008, Panasonic changed its name from “Matsushita Electric Industrial Co., Ltd.” to “Panasonic Corporation” and its ticker symbol on the New York Stock Exchange from “MC” to “PC.” Panasonic completed its brand name change from the “National” brand, used for home appliances and housing equipment in Japan, to the “Panasonic” brand by the end of fiscal 2010, ended March 31, 2010. Subsequently, the “National” brand was abolished and the “Technics” brand will be used only for specific audio products.

On October 1, 2008, JVC and Kenwood integrated management by establishing JVC KENWOOD Holdings, Inc. (JVC KENWOOD HD) through a share transfer. Panasonic has 24.4% of total issued shares of JVC KENWOOD HD.

On December 19, 2008, Panasonic and SANYO entered into the capital and business alliance agreement. Panasonic aimed to acquire the majority of the voting rights of SANYO assuming full dilution (which takes into account conversion of Class A preferred stock and Class B preferred stock into common stock) by means of a public tender offer bid. Panasonic and SANYO formed a close alliance in business with the prospect of organizational restructurings of both companies.

In April 2009, Toshiba acquired all of Panasonic’s shares in TMD, a joint venture that develops, manufactures and sells liquid crystal displays (LCDs) and organic light emitting displays (OLEDs).

In December 2009, Panasonic completed acquisition of a majority of the voting stock of SANYO. With this acquisition, SANYO and its subsidiaries became consolidated subsidiaries of Panasonic and will continue pursuing its business as a Panasonic Group company.

In January 2010, Panasonic transferred the rights and obligations with respect to the business of System Solutions Company, its internal division company, to Panasonic Communications Co., Ltd., its wholly-owned subsidiary, through business division. Panasonic aims to strengthen the system networking businesses including Security Systems, Broadcast Systems and Wireless VoIP Systems by integrating the system business and the fixed-line communications business toward global growth of B to B system business, in which the visual and communications businesses have been integrating under the further progress of IP networks.

In April 2010, Panasonic reorganized and integrated the Home Appliance and Automotive Motor, and Industrial Motor businesses into the Home Appliances Company. Panasonic also transferred the Information Equipment Motor Business to Minebea Motor Manufacturing Corporation.

In July 2010, Panasonic announced a plan to turn SANYO and PEW, which are both currently consolidated subsidiaries, into wholly-owned subsidiaries through simultaneous first-step tender offers and subsequent share exchanges.

 

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In October 2010, Panasonic completed its tender offers for shares of SANYO and PEW that it did not already own and, as a result, Panasonic’s shareholdings of SANYO and PEW increased to approximately 81% and 84% of the total voting rights, respectively.

In December 2010, Panasonic and each of PEW and SANYO resolved to conduct share exchanges in order to make Panasonic a wholly-owning parent company, and PEW and SANYO wholly-owned subsidiaries, at a meeting of each respective company’s board of directors. The share exchange agreements have been executed between Panasonic and PEW, and between Panasonic and SANYO. The share exchanges are scheduled to become effective on April 1, 2011.

Capital Investment

Total capital investment amounted to 385 billion yen, 494 billion yen and 449 billion yen for fiscal 2010, 2009 and 2008, respectively. (For a reconciliation of capital investment to the most directly comparable U.S. GAAP financial measures, see “Panasonic Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Key performance indicators” included elsewhere in this prospectus.) In these years, Panasonic curbed capital investment in a number of business areas, in line with an increased management emphasis on cash flows and capital efficiency. Panasonic did, however, selectively invest in facilities for those product areas that are expected to drive future growth, including such key areas as batteries and flat-panel TVs.

Business Overview

Sales by Business Segment

Panasonic is engaged in the production and sales of electronic and electric products in a broad array of business areas. Panasonic divides its businesses into six segments: Digital AVC Networks, Home Appliances, PEW and PanaHome, Components and Devices, and Other, adding “SANYO” as a new segment. The following table sets forth Panasonic’s sales breakdown by business segment for the last three fiscal years:

 

     Yen (billions) (%)  
     Fiscal year ended March 31,  
     2010     2009     2008  

Digital AVC Networks

     3,410         (9 )%      3,749         (13 )%      4,320   

Home Appliances

     1,204         (7     1,290         (8     1,405   

PEW and PanaHome

     1,632         (8     1,766         (8     1,910   

Components and Devices

     931         (11     1,045         (19     1,289   

SANYO

     405         —          —           —          —     

Other

     1,012         (6     1,072         (1     1,084   

JVC

     —           —          —           —          183   

Eliminations

     (1,176      —          (1,156      —          (1,122
                                          

Total

     7,418         (4 )%      7,766         (14 )%      9,069   
                                          

 

* Percentage above reflects the changes from the previous year.
* From fiscal 2009, the name of “AVC Networks” was changed to “Digital AVC Networks.”
* The name of “MEW and PanaHome” was changed to “PEW and PanaHome” as of October 1, 2008.
* Panasonic has changed the transactions related to Global Procurement Service Company since April 1, 2008. Accordingly, segment information for Other and eliminations for fiscal 2008 have been reclassified to conform to the presentation for fiscal 2009.
* JVC became an associated company under the equity method from a consolidated subsidiary in the fiscal 2008 second quarter.
* SANYO and its subsidiaries became Panasonic’s consolidated subsidiaries in December 2009. The operating results of SANYO and its subsidiaries after January 2010 are included in Panasonic’s consolidated financial statements.
* Panasonic restructured the motor business on April 1, 2010. Accordingly, the prior figures for Home Appliances, and Components and Devices in fiscal 2010, 2009 and 2008 are reclassified to conform to the presentation for fiscal 2011.

 

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Digital AVC Networks

Panasonic’s principal products in Digital AVC Networks segment include video and audio equipment and information and communications equipment. This segment provides hardware, software, services and solutions built on cutting-edge technologies as a source of competitiveness. In addition to developing attractive products with Panasonic’s proprietary technology, Digital AVC Networks links together various equipment to offer consumers more secure and comfortable lifestyles.

In the digital AVC business, Panasonic is manufacturing a high definition product group containing a variety of AV, security, electronic, and Internet-enabled equipment that can be linked to a flat-panel VIERA TV and easily operated with a single remote (VIERA Link).

For flat-panel TVs, in fiscal 2010, amid rising global demand, Panasonic expanded its lineup, doubling the number of basic models from the previous year and responding in detail to diversifying market needs. As a result, strong sales were recorded in Japan, where the market was buoyed by the government’s “eco-point” program, and in Asia and emerging markets where high growth continued. Unit sales climbed sharply to 15.84 million units, 60% higher than the previous fiscal year.

In terms of flat-panel TV production, PDP manufacturing began at the fifth domestic PDP plant in Amagasaki in November 2009, and Panasonic also started operations at the IPS Alpha LCD plant in Himeji in April 2010. These state-of-the-art facilities should raise productivity further, increasing cost competitiveness, as should stepped-up efforts to relocate module and finished product production overseas.

For Blu-ray Disc and DVD recorders, in fiscal 2010, Panasonic increased its sales amid an expanding market for Blu-ray Disc recorders along with the spread of digital broadcasting and the popularity of flat-panel TVs. Higher sales were also strongly supported by the networking features of Panasonic’s products which enable them to link various devices, as well as basic functions such as extended recording in full HD video and simple operation. Panasonic maintained its top share in the global market as a result.

For digital cameras, in fiscal 2010, the market remained difficult as demand fell. While sales of Panasonic LUMIX digital cameras edged down slightly year on year, both high-value-added and standard models sold well. Impressively, sales of digital interchangeable lens system cameras such as the world’s smallest and lightest*1 GF1 model grew strongly on the back of widespread support from novices to camera enthusiasts alike for their easy to use functions on par with compact cameras as well as high performance and picture quality that only interchangeable lens system cameras can deliver.

For digital video cameras, in fiscal 2010, sales were down year on year again due to demand and price declines, particularly in Europe and the United States. The HDC-TM30, the lightest compact model on the market, captured the number-one share in Japan. The HDC-TM300, a high-end model featuring three proprietary sensors, won market acclaim in Japan and overseas. For example, Camcorderinfo.com™, a major North American reviewer, selected this camcorder as its No.1 model.

In the fiscal 2010 notebook PC market, Panasonic’s Let’s note and TOUGHBOOK series posted lower sales year on year due to dwindling corporate demand both in Japan and overseas. However, Panasonic continued to develop and refine products in these series under the concept of high performance, light weight, long battery life and ruggedness, winning strong acclaim from the market. In particular, the TOUGHBOOK series has maintained the top position in the worldwide market for rugged mobile computers for eight consecutive years. And in October 2009, Panasonic added the CF-S and CF-N series business mobile PCs in the Japanese market. These Let’s note models feature even higher performance and extended battery life.

Panasonic is strengthening its system networks business, which integrates the system solutions and fixed-line communications businesses. This is in response to global growth in the BtoB system market, which is seeing

 

*1 For an interchangeable lens digital camera incorporating an internal flash as of April 1, 2010. Panasonic estimate.

 

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increasing integration of image and communications technologies due to advances in IP. As part of this, on January 1, 2010, Panasonic merged its internal division company System Solutions Company and Panasonic Communications Co., Ltd. to form Panasonic System Networks Co., Ltd.

In the system networks business, in fiscal 2010, Panasonic vigorously developed its business operations overseas, centered on Communication Products for connecting people through voice and image, and Security Products for safeguarding human, property and information in companies and regions.

A highlight of the past fiscal year was the largest delivery of system products to an Olympic Winter Games at the Vancouver 2010 Olympic Winter Games. Panasonic supplied a range of equipment for the competition venues and the Olympic athlete villages, including LED large screen display systems, professional audio systems, DLP® (Digital Light Processing) projectors and AV security camera systems. Panasonic also shared the excitement of the Olympic Games through high-quality images and sound, such as by connecting welcome ceremonies at the Olympic athlete villages in Whistler and Vancouver via a HD Visual Communications System. This also helped cut athlete entourage travel time and costs as well as CO2 emissions.

In the mobile communications business, Panasonic offers mobile phones incorporating advanced technologies, and communications infrastructure equipment such as base stations. Through these products, Panasonic aims to realize a ubiquitous networking society that offers high-level security and greater convenience and comfort. Moreover, Panasonic proposes new lifestyles by linking mobile phones with its other wide-ranging products, such as the DIGA Blu-ray Disc/DVD recorders. In fiscal 2010, sales were lower than the previous year in the mobile communications business amid persistently weak demand in the Japanese mobile phone market, particularly for high-end handsets. However, Panasonic further sought to add value to the VIERA Keitai series. Besides enabling users to watch programs recorded on Blu-ray Disc-enabled DIGA recorders, the VIERA Keitai series features cameras with enhanced functionality, including high-speed auto focus and Intelligent Auto (iA) mode. Also Panasonic captured market share by developing stylish and simple volume-zone handsets emphasizing basic functions.

In the automotive electronics business, Panasonic operates in wide-ranging fields, from car navigation systems to key devices such as engine control units and batteries for eco cars. As interest rises in green and safer vehicles, automotive electronics are expected to fulfill a wider range of roles, highlighting the considerable growth potential. In fiscal 2010, sales recovered from the previous fiscal year thanks mainly to a rebound in auto sales instigated by government initiatives around the world to spur new car purchases, as well as the lowering of expressway toll charges in Japan, which stimulated demand for ETC terminals. New car navigation system products also drove sales. Strada F Class, for example, won high marks as the first car navigation system to deliver high-definition picture quality in combination with the world’s first in-car Blu-ray Disc player. Panasonic also bolstered its product lineup with the aggressive launch of new products such as portable Strada Pocket car navigation systems.

Home Appliances

Panasonic’s principal products in this segment include home appliances such as refrigerators, room air conditioners, washing machines and clothes dryers, and vacuum cleaners. This segment also includes lighting and environmental systems.

In home appliances, Panasonic offers safe, reliable and well-liked products and services in the fields of people’s daily living environments closely linked to clothing, food and housing. It also develops products tailored to people’s lives and enhances environmental performance. In fiscal 2009, Panasonic marketed its home appliance products, such as room air conditioners, under the Panasonic brand for the first time nationwide in Japan. Overseas, Panasonic introduced new refrigerators and washing machines with cutting-edge technologies in Europe in March 2009. In fiscal 2010, sales declined because of lower demand, as well as the negative impact of sluggish room air conditioner sales during unseasonable weather. In Japan, however, refrigerator, room air

 

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conditioner, tilted-drum washer/dryers and other product models featuring “ECO NAVI,” which automatically saves electricity depending on the mode of use, won strong support as appliances with a high level of environmental performance, thereby driving sales. Sales were especially strong for large refrigerators with a capacity of 400 liters or more, which benefited from the “eco-point” system in Japan. Overseas, Panasonic washing machines saw strong sales in China on the back of a Chinese government home appliance subsidy program. Furthermore, refrigerators and washing machines in Europe have sold well as consumers have appreciated their industry-leading environmental performance.

In the lighting business, Panasonic has been developing products that conserve energy and resources, and are based on universal design. Panasonic has maintained a top-class share in the lighting field in Japan. In fiscal 2010, low-power-consumption and long-life LED bulbs were released under the EVERLEDS brand in Japan to a strong response from the market. Coupled with the beneficial effect of the Japanese government’s “eco-point” system, sales steadily increased. Due to the rapid expansion in demand for LED lighting products, production was moved to a facility in Indonesia that can manufacture large quantities in December 2009. This plant can manufacture 300,000 units per month and is ramping up its production as well as production efficiency by capitalizing on our expertise in producing ball-type fluorescent lamps.

The environmental systems business of Panasonic is developing ventilation fan systems, indoor air quality products and environmental engineering businesses, to offer environmentally-conscious and comfortable lifestyles, and a recycling-oriented society. In fiscal 2010, air purifiers and nano-e generators to combat influenza performed strongly in Japan. Moreover, sales of ultra pure water manufacturing equipment for plasma and LCD panels, lithium-ion batteries and other production equipment were strong. Overseas sales grew on the back of rising demand for ceiling fans, particularly in Asia.

PEW and PanaHome

This segment includes Panasonic Electric Works Co., Ltd. (PEW), PanaHome Corporation (PanaHome) and their respective subsidiaries.

PEW manufactures, sells, installs and provides services related to a wide variety of products. These include electrical construction materials, home appliances, building products, electronic materials and automation controls.

In fiscal 2008, in response to an increase of public demand, home fire alarms recorded a rise in sales. Aesthetic products such as nanocare facial ionic steamers won strong market acceptance. Sales of environmentally-conscious products like multilayer printed circuit board materials and semiconductor encapsulation materials grew significantly. In fiscal 2009, new Panasonic brand products, including personal care products, such as nanoparticle ion steamers received strong market acceptance. In addition, environmentally-conscious lighting products including LED lighting showed steady growth. In fiscal 2010, PEW continuously posted higher sales of LED lighting in Japan. In addition, sales of new products grew steadily, including the hair dryer “nano care”, which provides UV care with “nano-e” particles, and Massage Sofa, which won strong acceptance in the market for interior design qualities. Modular kitchens and unit baths in the standard-price range also showed steady sales growth. Moreover, PEW aggressively expanded sales of automotive devices such as EV relays and Back & Corner (B&C) sensors in step with the growing demand for eco car in Japan. Overseas sales staged a recovery on rising demand for devices for use in vehicles, digital home appliances, and mobile phones, which was fanned by economic stimulus programs, particularly in China.

PanaHome is developing its business under the basic concept of offering “Eco-Life Homes” that provide people- and environment-conscious living spaces. PanaHome centers on detached housing, asset management and home remodeling businesses, emphasizing safety and security, health and comfort, and energy generation and conservation.

 

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In fiscal 2008, PanaHome became the first in the Japanese housing industry to offer an all-electric rental apartment house series called EL MAISON NEXT. In fiscal 2009 and 2010, PanaHome diligently pursued its superior environmental performance and energy conservation technologies, including solar power generation systems and all-electric home design fixtures. In recognition of strong acceptance for these activities, PanaHome won the House of the Year in Electric 2009 prize of excellence, receiving a House of the Year award for the third consecutive year.

Components and Devices

This business segment of Components and Devices supplies high-performance and high-value-added components and devices used in various products ranging from digital AV equipment and information and communication devices to home appliances and industrial equipment. Panasonic develops and strengthens the competitiveness of cutting-edge devices that help equipment become smaller, lighter, slimmer and more sophisticated. This business segment also contributes significantly to making finished products more energy efficient.

In the semiconductor business, Panasonic provides a wide range of semiconductor products as total solutions, such as system LSIs integrating multiple functions on a single chip, and image sensors delivering higher picture quality for digital cameras.

The UniPhier® Integrated Platform combines software and hardware resources across different product categories to improve R&D efficiency and design quality. In fiscal 2008, Panasonic began mass production of 45nm-process system LSIs using 300mm wafers. In fiscal 2009, Panasonic proceeded with the commercialization of 45nm-process next-generation UniPhier® system LSIs. Panasonic also developed an application/transmission integrated LSI that combines one system LSI for the communications function of mobile phones and another system LSI for an application function in one UniPhier®. In fiscal 2010, Panasonic developed a new UniPhier® system LSI for displaying high-resolution 3D images, providing network capability and enabling other functions. This new system LSI is incorporated in 3D plasma TVs and Blu-ray Disc recorders. By the end of fiscal 2010, UniPhier