Panasonic’s auto deal deserves a speedy sequel

Panasonic Holdings

22/11/2023 03:32

(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
       HONG KONG, Nov 22 (Reuters Breakingviews) - Panasonic’s
 6752.T  decision to sell part of its automotive unit suggests
CEO Yuki Kusumi’s plans are taking a promising turn. The
business, which pioneers technology like infotainment systems
for the next generation of internet-connected cars, is a growing
but capital-intensive opportunity. In the year ending March
2023, it was the second largest of Panasonic’s five segments by
sales, with revenue of 1.3 trillion yen ($8.8 billion), yet its
1.2% operating margin was the slimmest. Selling a stake to
Apollo Global Management  APO.N , with the possibility of a
listing later, could help fund faster development without
denting Panasonic’s balance sheet or returns.
    He could go further. A decade ago, Sony  6758.T  and Hitachi
 6501.T  trimmed multiple underperforming businesses. Their
shares have since quadrupled in value, while Panasonic’s gained
around 40%. It’s not clear if Panasonic can follow Sony and
Hitachi’s script, however. This was an obvious target for
Kusumi, who previously led the auto unit. Picking other
potential candidates for an overhaul could be much more
challenging. For example, their consumer products business faces
intense competition and weak demand in Asia but it’s also the
unit that made the company a household name. Either way, his
timing is impeccable. Japanese equities just hit their highest
levels since the 1990s and could rise higher according to
analysts polled by Reuters, flattering the valuation of any
spinoff or divestment. 
    If he keeps up the momentum, investors are in for a fun
ride. (By Katrina Hamlin)

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Panasonic's shares have lagged Sony and Hitachi's    https://tmsnrt.rs/3MWfD9U
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 (Editing by Francesco Guerrera and Thomas Shum)