HONG KONG: Consolidation in the Japanese electronics sector, which is struggling with a rapidly deteriorating spending environment, gathered pace Friday as Panasonic and Sanyo said they were pursuing a merger, a deal that would bring together two of Japan's best-known consumer electronics brands, with combined sales of more than ¥11 trillion, or $111.5 billion.

In an announcement that had been widely expected, Panasonic and Sanyo said they would discuss making the much smaller Sanyo, which has been ailing for years, a subsidiary of Panasonic. The companies hope to announce terms and pricing by the end of this year.

"We aim to share both companies' management know-how and business resources while collaborating with each other, thereby creating a global competitive foundation which will maximize corporate values of both Panasonic and Sanyo and bring benefit for both companies' shareholders and all other stakeholders, including customers and employees," the companies, which are based in Osaka, said in a joint statement Friday.

Panasonic did not say how much it planned to offer for each Sanyo share. Koya Tabata, an analyst at Credit Suisse, estimated earlier this week that Panasonic could offer as much as ¥140 per Sanyo share, according to Reuters. That would value a deal for the whole of Sanyo at as much as ¥862 billion.

The potential link-up comes at a time when the consumer electronics industry is reeling from a sharp drop-off in so-called discretionary spending - purchases of goods including television sets, refrigerators and cameras - as shoppers, worried about global recession and shaken by the turmoil in the stock markets, keep their wallets firmly shut.

While this problem has affected companies around the world, Japanese exporters have suffered the extra burden of a strong yen, which makes their goods more expensive in crucial export markets. Rising competition from rivals in South Korea and China has also increased the pressure on Japanese manufacturers to consider mergers.

Panasonic, the leading maker of plasma televisions, is particularly interested in acquiring Sanyo because of its leading position in rechargeable batteries, which are widely used in cellphones and laptop computers.

"This deal would make Panasonic a comprehensive consumer electronics maker," Yoku Ihara, head of equity research at Retela Crea Securities in Tokyo, told Bloomberg News. "The purchase comes at the best time for Panasonic as Sanyo is focusing on batteries, a growing business area."

The deal would also enable it to enter the solar market. Sanyo is a leading maker of solar cells, behind rivals like Q-Cells of Germany and Suntech Power Holdings of China.

"As a result of this merger, Panasonic will become a huge firm - the Toyota of the electrical appliance world - and that's good," Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities, told Reuters.

With Barack Obama as U.S. president, "there's likely to be quite a push towards clean energy, and that means that Panasonic is now in a very strong position, given Sanyo's battery production," Yamagishi said. "They have this market wrapped up now."