Panasonic will start discussions to take over Sanyo Electric with the aim of reaching a deal by the end of this year, the two Japanese companies said Friday.

The announcement, which was expected after several leaks to Japan's influential Nikkei business daily, was made after the boards of directors at both companies met Friday morning. A project team will be immediately set-up to start what is likely to be an intensive series of meetings, discussions and due diligence before a definitive deal can be concluded.

Sanyo has been struggling to turn around its business for the past few years. The company recorded its first profit in four years in its most recent fiscal year, ended in March 2008. Despite being battered by fierce competition in the home and consumer electronics markets, the company remains the world's biggest manufacturer of lithium-ion batteries and an innovator in green-energy products such as solar cells.

Panasonic is Japan's biggest consumer electronics company and has a large battery business of its own. It's keen to get its hands on Sanyo's battery and solar expertise as well as know-how in areas such as mass-production, Sanyo's knowledge of which it called "remarkable" in a statement.

The deal will likely involve Panasonic purchasing shares currently held by Sanyo's top three stockholders: Japanese financial groups Sumitomo Mitsui and Daiwa Securities and U.S.-based Goldman Sachs. Sanyo issued roughly ¥300 billion (US$3 billion) of preferred shares to the three in March 2006 as part of its financial restructuring plan.

Collectively the shares, if converted to common stock, would represent around 70 percent of Sanyo's outstanding shares. The shares can however only be sold with Sanyo's permission but that part of the contract will expire in March 2009 thus the push to seal a deal by the end of the year.

Panasonic is by far the bigger of the two companies. In the fiscal year to March it achieved sales of ¥9.1 trillion while Sanyo's sales totaled ¥2 trillion. Net profit at Panasonic was a record ¥282 billion and at Sanyo it ¥29 billion.

The two companies share links that go back to the founding in 1918 of Matsushita Electric Devices Manufacturing Co., the forerunner to today's Panasonic.

When Konosuke Matsushita started his company to make electric plug adapters for light sockets he took on a small number of staff including brother-in-law Toshio Iue. In 1947 Iue would go on to start Sanyo Electric. Today the two companies remain based in Osaka and their headquarters are only a short drive apart.