Toshiba accepted a buyout offer from a Japanese consortium as the iconic conglomerate moved a step closer to ending a troubled chapter in its more than 140-year history.
The Tokyo-based company’s board approved on Thursday a bid of about 2 trillion yen (€14.2bn) from a group led by domestic private equity firm Japan Industrial Partners (JIP), it said in a statement. The offer is at about a 9.7 per cent premium to Toshiba’s closing price on Thursday.
As the next step a tender offer is expected to start in late July, with the exact schedule to be announced later, the company said.
Seventeen Japanese companies and six domestic financial institutions will participate in the buyout, Toshiba said. Orix, Rohm and Chubu Electric Power are among the firms, the Nikkei reported before the statement, confirming earlier Bloomberg News reports.
The move could bring down the curtain on years of turbulence at the Japanese firm after a series of scandals plunged it into difficulty and set it on the path to a sale. Toshiba’s management, the Japanese government and the company’s large proportion of vocal foreign shareholders have been at odds over the company’s future, with activist investors seeking to maximise returns while the state prioritised keeping sensitive technologies and businesses out of foreign hands.
“Having a resolution here would be a positive as one of the issues for Toshiba has been a lack of a consistent strategy due to the constant changes of direction,” said Mio Kato, an analyst at LightStream Research. But “it still leaves some work to do in terms of establishing new growth drivers and maximising the potential of some of the emerging businesses”.
The saga has become a test case for corporate governance in Japan as a list of prominent activist investors saw an opportunity and took stakes in the company. They included billionaire Paul Singer’s Elliott, Seth Fischer’s Oasis Management and Singapore-based funds Effissimo Capital Management and 3D Investment Partners.
And some of the world’s biggest private equity firms considered making buyout offers, including Bain Capital, CVC Capital Partners and KKR.
Toshiba’s nuclear power business is deemed important to national security. It’s involved in decommissioning the Fukushima Dai-Ichi atomic power plant, which was wrecked in the earthquake, tsunamis and nuclear meltdowns of 2011. That made it hard for the government to accept a transfer of ownership to an overseas firm.
Before a downturn in demand for memory chips and hard drives the consortium had offered as much as 5,500 yen per share, Toshiba said. But JIP lowered its bid a number of times since then due to deteriorating market conditions, the difficulty in securing financing and Toshiba’s earnings outlook cut, it said.
If the sale goes through it will be one of the largest Asian transactions this year at a time when deal volumes have plunged. It will also be one of the biggest ever private equity-led buyouts in Japan.
The path to the board’s acceptance has been far from smooth. The process faced multiple delays, with Bloomberg News reporting that the JIP-led group faced headwinds securing financing as banks became more cautious about providing funds for large deals in a less favourable economic environment.
Toshiba has lurched from one disaster to another over the past eight years, starting with an accounting scandal in 2015 that devastated profits and led to a companywide restructuring. The subsequent unravelling of a costly foray into the nuclear power business in the US led to a $6.3 billion writedown and saw it teeter on the edge of delisting. It was forced to sell its crown jewel memory-chip unit and offer stock that was snapped up by foreign investors. – Bloomberg
