Panasonic shares surge as stake sale plan sparks restructuring hopes

Panasonic Holdings

20/11/2023 09:56

By Daniel Leussink
       TOKYO, Nov 20 (Reuters) - Shares of Japan's Panasonic
Holdings  6752.T  have rallied about 10% since it announced on
Friday a plan to sell a stake in its automotive systems business
and the unit's potential listing raised broader restructuring
hopes.
    The shares surged for a second session on Monday after
posting their biggest one-day jump in half a year on the final
day of last week on news the company wants to sell a stake in
the unit to Apollo Global Management-run funds.
    Analysts said Panasonic could be following in the footsteps
of another conglomerate, Hitachi  6501.T  which in recent years
sold off several businesses to transform into a digitally driven
service firm.
    Panasonic needs to adjust nimbly as it faces disruption from
competition in traditional areas of growth, said Damian Thong,
an analyst at Macquarie in Tokyo.
    "They started by being big and slow, which is fine if the
market was slow, but because the markets are changing, they need
to move faster," Thong said from Singapore.
    "They need to learn to deal with a more challenging, a more
fluid external environment."
    From a market performance perspective, the differences
between Panasonic and Hitachi are striking. Over the last
decade, Hitachi's shares have more than trebled, when taking
into account dividends, compared to a 87% return by Panasonic.
    Investors reacted positively to the potential sale of the
stake in the automotive unit, which makes cockpit and
electronics systems. The announcement was both unexpected and
welcomed, as investors had not foreseen Panasonic setting out on
a course to trim its portfolio at this time.
    "It is going to be a long journey with ups and downs, but if
it (Panasonic) can further restructure its portfolio, it can
become another transformation case-study," analysts at Jefferies
wrote in a research report.
    With its plan, Panasonic likely starts a journey to make
itself into a company with a higher return on equity, they said.
    Hitachi's return on average common equity, a measure of
profitability, has averaged 14.6% over the last three years,
compared to 8% at Panasonic, according to LSEG.
    Hitachi's 2019 sale of its chemicals unit was a "watershed
event in Japan's business reinvention," Ulrike Schaede, a
professor of Japanese business at the University of California
San Diego wrote in a 2020 book.
    Other large Japanese companies were getting ready to make
similar "hard decisions", she wrote at the time.
    Panasonic's automotive unit is separate from its energy unit
that makes batteries for electric vehicles, including those from
Tesla  TSLA.O .
    

 (Reporting by Daniel Leussink; Editing by Simon Cameron-Moore)
 ((daniel.leussink@thomsonreuters.com; Twitter:
@danielleussink;))