Times of Oman
Oct 09, 2015 LAST UPDATED AT 09:30 AM GMT
Struggling Japanese electronic giants to raise $3b in ‘garage sale’
December 10, 2012 | 12:00 AM
Panasonic’s fixed assets of $21 billion are around 30 per cent more than those of Apple, and are almost double the company’s market value. Pic: Bloomberg

Tokyo: Panasonic, Japan's struggling maker of Viera brand TVs, owns more than 10 million square metres of office and factory space, dormitories for its workers and sports facilities for its rugby, baseball and women's athletics teams.

As it battles for Christmas shoppers' wallets in the year-end holiday season, the sprawling electronics conglomerate is also seeking buyers for some of those properties to trim its fixed costs and improve cashflow at a time of intense competition, particularly from South Korean rivals such as Samsung Electronics.

Japan's other troubled TV makers, Sony and Sharp, are also selling buildings and businesses in a giant 'garage sale' that could raise a combined $3 billion. Panasonic plans to raise $1.34 billion from offloading property and shares in other Japanese companies by March-end, the group's chief financial officer Hideaki Kawai said.

"We have a lot of land and buildings in Japan and overseas," he said in an interview at the company's head office in Osaka, in western Japan. He declined to list which properties would go on the block, but said most are in Japan. 

24-storey Tokyo block
Included is a 24-storey central Tokyo block built in 2003 with more than 47,300 square metres and housing 2,000 Panasonic workers a source familiar with the plan said. Kawai added that Panasonic would raise about a quarter of the sell-off funds by getting rid of shares it owns in other companies - a common practice of cross-shareholdings in Japan.

The proceeds would help bolster free cashflow to ¥200 billion ($2.43 billion) for the business year to March, Kawai said, and allow Panasonic to reduce its debt and maintain its crucial research and development effort as it revamps its business portfolio. It will sell more assets in the year starting in April if cashflow dips below ¥200 billion, Kawai added. Panasonic president Kazuhiro Tsuga has promised to shut or sell  businesses operating at below a 5 per cent margin. Those sales could start as soon as April.

Panasonic's fixed assets of $21 billion are around 30 per cent more than those of Apple, and are almost double the company's market value. The company, founded almost a century ago as a small electrical extension socket maker, trades at around half its book value which includes intangible assets such as patents. Sony trades at 39 per cent of book, Sharp at 30 per cent.

The fixed assets buildings, land and machinery of the three companies that were not so long ago a byword for innovation in household gadgetry total around $42 billion, while their combined market value is $24 billion.

Cashflow is king
The three firms have been downgraded by credit ratings agencies, making it tougher to raise funding on capital markets, and making asset sales more urgent. Selling assets "is good in terms of their credit ratings because, for all three, it will lower fixed costs and they can reduce their capex requirements. Eventually, this could improve operating margins and, more importantly, cashflow," said Alvin Lim, an analyst at Fitch Ratings in Seoul.

"The gap with Korean makers seems to be widening. It's going to be very difficult for them to regain their top-tier position," said Fitch's Lim. As the three Japanese firms, all under new leadership, have sketched out restructuring plans, the cost of insuring their debt against defaulting in 5 years has dropped from spikes just a month ago. Credit default swaps for Sharp and Sony are down to levels last seen 3 months ago, while Panasonic's have dropped 40 per cent in the past month.

Three paths  

While Panasonic is looking to revamp its business around batteries, auto parts and household appliances, Sony is doubling down on smartphones, gaming and cameras. Sharp, meanwhile, is focusing on display screens and is forging alliances with the likes of Taiwan's Hon Hai Precision Industry and US chipmaker Qualcomm.

Sony may also take the r

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