Panasonic is preparing to make an offer to buy the whole of Sanyo Electric within two months but may be forced into long, painful price negotiations by Goldman Sachs and other big investors.

Industry sources believe that Panasonic's impending offer, which could be worth as much as $10 billion (£6.2 billion), may draw out other potential trade buyers from Korea or China that are interested in Sanyo's industry-leading battery business, an operation whose technological edge will be in hot demand if the market for electric vehicles takes off.

A Panasonic-Sanyo union would be a daunting competitor for the rest of the Japanese electronics industry. As well as creating the largest company in the sector - with combined annual sales of more than $100 billion - Panasonic would suddenly become by far the biggest global player in rechargeable batteries and a significant force in solar panel development.

The prospect of a tender offer by Panasonic for Sanyo sent shares in the latter soaring by their daily trading limit for a second day yesterday. Traders said that the buying frenzy had been prompted in part by comments from Panasonic executives which suggested that the company was bracing itself for a bidding battle.

A Panasonic source was quoted as saying of Sanyo's battery operations: “We want it so badly we can taste it ... It would be a tremendous blow to us if another firm took it.” However, sources close to the deal said that a more immediate issue was the likely progress of talks between Panasonic and the three banks that rescued Sanyo from the brink of collapse in 2006.

Goldman Sachs, Daiwa Securities and Sumitomo Mitsui Banking Corporation, which own preferred shares equivalent to 70 per cent of Sanyo's common stock, hold the key to any deal to buy the company.

Price negotiations are expected to begin in earnest by the end of the week, although a clear division of opinion has emerged. Panasonic believes that the huge chunk of unconverted preferred shares means that Sanyo is overvalued.

The three banks are understood to feel that the market has known about the arrangement long enough for the current price to reflect fair value.

Sanyo, in common with the rest of the sector, has been hit hard by the strengthening yen and the downturn of consumer confidence in the United States. Yesterday the company announced a 67 per cent drop in second-quarter profits.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive