Japanese electronic rivals Panasonic and Sanyo are starting alliance talks, which could result in Panasonic taking over the smaller company.

Panasonic said it wanted to make Sanyo its subsidiary, effectively creating Japan’s largest electronics maker. Sanyo has been facing problems in recent years, cutting thousands of jobs and selling unprofitable operations.

“Panasonic and Sanyo will start discussions with the aim of maximizing both companies’ corporate values by pursuing synergies between both companies,” Panasonic president Fumio Ohtsubo and Sanyo president Seiichiro Sano said in a statement.

This week, Sanyo reported a 67% drop in its July-September profit to 4.4bn yen ($44m,) due to a stronger yen, rising material costs and falling gadget prices.

The same factors also contributed to a drop in Panasonic profit of 16% to 55.5bn yen for the same period.

The two companies have historical ties, with their founders being brothers-in-law.

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