Sony Corp has been approached by at least three investment banks
offering to sell its battery business as the struggling Japanese group
looks to offload non-core assets and focus on reviving its consumer
electronics business, banking sources said.
Selling the unit, which
employs 2,700 people and had sales last year of $1.74 billion, would
help Sony cut costs and generate cash as it restructures its operations,
three people involved in the preliminary discussions told Reuters.
company, a byword for innovative gadgetry in the 1970s and 80s, has
been battered by weak demand for its TVs in a fiercely competitive
market. The TV business has racked up huge losses; Sony's market value
has slumped to below $10 billion and ratings agency Fitch last week
downgraded the company's debt to "junk" status a move likely to push up
borrowing costs and make asset sales more attractive.
Hirai has pledged to rebuild Sony around gaming, digital imaging and
mobile devices, while nurturing new businesses such as medical devices.
He is axing 10,000 jobs, closing facilities and selling assets. Any
disposals would be part of a broader "garage sale" by Japan's leading
electronics groups that are hurting in weak markets and tight financing.
buyers for Sony Energy Devices Corp founded in 1975 as Sony-Eveready,
a joint venture with Union Carbide Corp could include Taiwan's Hon Hai
Precision Industry and BYD Co Ltd, a Chinese carmaker backed by
billionaire investor Warren Buffett, said one of the sources. Hon Hai is
also in negotiations to become rival TV maker Sharp Corp's biggest
Despite a strong yen, interest
is likely to come mainly from potential foreign buyers, said the
sources, who did not want to be named as the talks are private.
the business overseas may not go down well with a Japanese government
that in the past has kept technology at home by promoting alliances
between local producers. Panasonic Corp, NEC Corp and Hitachi Ltd also
make lithium-ion batteries, though the firms' fabrication technology
Sony declined to comment on the possible sale of the
business, which makes lithium-ion batteries used in smartphones, tablets
and PCs. "At our corporate strategy announcement in April, (Hirai) said
we would explore possible alliances in E-vehicle batteries and battery
storage," said spokesman George Boyd.
As with TVs, Sony has
struggled to compete against South Korean rivals in a battery business
that is worth $18 billion a year. The small cells that power mobile
devices now account for around 60 percent of the market, ahead of those
used in cars and electrical tools, according to research company IHS
While lithium-ion battery demand has steadily expanded
with the boom in mobile consumer electronics, severe price competition
has resulted in razor thin margins that favour large-scale manufacturers
with weak local currencies.
"The battery business is a prime
example of the company's loss-making and unwanted assets. It doesn't
make sense for them to keep it," said one of the banking sources.
Falling market share
Hirai doubles down on Sony's strength in consumer electronics, the
company has sold a chemicals company, with 2,900 workers, and may also
let go its U.S. headquarters building in New York go. At the same time,
it has spent close to $2 billion on a U.S. game clouding company and a
stake in medical equipment maker Olympus Corp.
Sony produced 74
million lithium-ion battery cells in July-September almost 40 percent
fewer than in the first quarter of 2008, when its output topped Samsung
SDI Co Ltd's 110 million and LG Chem Ltd's 54 million, according to
Techno System Research in Tokyo. Sony's market share is now 7 percent,
dwarfed by Samsung SDI's 27 percent, Panasonic's 21 percent and LG
Chem's 17 percent.
Sony's battery unit, which also makes button
batteries for watches and smaller appliances and optical devices, has
three factories in Japan and two overseas assembly plants in China and
Singapore. It has yet to enter the more lucrative business for
In its most recent filing, Sony valued the
battery unit's fixed assets, including production sites and machinery,
at 52 billion yen. Under Sony's accounting rules, asset sales are
typically booked as operating profit.
The cost to protect $10
million of Sony debt against default for five years has edged higher
this week to almost $400,000. The CDS spreads had tumbled earlier this
month from above 480 basis points after Sony said it would raise 150
billion yen through a sale of convertible bonds.
© Thomson Reuters 2012