Matsushita Consolidates to Surpass Hitachi

by News Editor
Published on Dec 23, 2003 12:00 AM



Matsushita Electric Industrial Co. said that it will turn Matsushita Electric Works Ltd. into a consolidated subsidiary by raising its stake in the affiliate to 51% from the current 31.8% through a tender offer. By overlapping operations at the two firms and reinforcing their business partnership, the move will propel Matsushita Electric Industrial past Hitachi to become the nation's largest electronics maker, with consolidated sales of 8.5 trillion yen ($78.7 billion).

Twenty-eight percent of Matsushita Electric Industrial's group sales in fiscal 2002 was from audiovisual equipment such as TVs and VCRs, and 31% was from information and communications equipment such as cell phones. But a lofty 16% came from the sale of home appliances such as air conditioners and refrigerators. When this is combined with Matsushita Electric Works' specialties in lighting equipment and housing construction materials, Matsushita will have a structure that covers the entire home.

Other major electronics manufacturers have taken similar positions. Hitachi is focusing on its infrastructure strengths, and Sony is boosting its position in entertainment. Hitachi aims to become a specialist in infrastructure, as their power and industrial systems division accounted for 28% of its sales, and information and communications systems for corporations made up 23%. At Sony, games account for 13% sales, and the movie business accounts for 11% of sales. As a result, since 2000, the company has been beefing up its entertainment business by turning its music and game units into a wholly owned subsidiary.

TOGETHER AGAIN

Matsushita Electric Works was spun off from Matsushita Electric Industrial in 1935, and is strong in housing materials and lighting equipment. Although the two companies share brand identity and cooperate synergies, they have maintained managerial independence. Through a tender offer Matsushita Electric Industrial plans to buy 140.55 million Matsushita Electric Works shares at an estimated cost of 146.1 billion yen. The firm will pay 1,040 yen for each share it acquires.

By turning Matsushita Electric Works into a subsidiary, Matsushita Electric Industrial intends exercise managerial control. This will manifest in the right to veto major proposals at Matsushita Electric Works’ shareholder meetings. On January 9, the two companies will form a committee to determine how to integrate overlapping operations and research and development activities in home electronics, housing materials, lighting equipment, health care products and medical equipment. Matsushita Electric Industrial hopes to take advantage of the sister company's technological and marketing prowess in housing and construction equipment.

The move by Matsushita Electric Industrial to turn Matsushita Electric Works into a subsidiary suggests that an effort by President Kunio Nakamura to consolidate management is now at the final stage. Nakamura has pushed management reform since he took office in June 2000, and believes consolidation is key for growth in the Matsushita group.

In October 2002, Matsushita Electric Industrial turned five core group companies into wholly owned subsidiaries. Nakamura considered involving Matsushita Electric Works in the group reorganization, but abandoned the idea in part to give priority to restructuring efforts, and because of the huge implications of such a move.

Encouraged by the results of his 3-year-old reform initiative, Nakamura was finally able to expand management reform to include Matsushita Electric Works.