Toshiba Receives $15 Billion Takeover Offer

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Japan Industrial Partners-led consortium submits bid to buy Toshiba for $15 billion, but reportedly lacks bank approval for full price

Toshiba’s ownership remains undecided this week, after a consortium led by Japan Industrial Partners (JIP) reportedly submitted a 2.2 trillion yen ($15 billion) bid for the Japanese conglomerate.

However, according to Reuters, citing the Nikkei newspaper on Monday, the offer remains uncertain as it lacks key commitment letters from banks, raising questions about its success.

The $15 billion offer is in line with Toshiba’s market value, and the buyout consortium is reported to be aiming to round up the financing by the end of this month – if Toshiba accepts the offer.

Toshiba offer

The consortium bidding for Toshiba is led by private equity group Japan Industrial Partners (JIP), but would also include ten other investors, including utility Chubu Electric Power and financial services group Orix.

JIP, previously selected by Toshiba as the preferred bidder, was widely expected to fail to deliver a firm proposal with bank commitments in time for the Monday deadline it received from the company, Reuters reported.

It appears JIP’s plan to allow Toshiba’s current management to stay on after a takeover has raised alarm bells among some of Japan’s big banks, whose funding is seen as essential to fund the deal, sources reportedly said. .

JIP, Chubu Electric and Orix will each invest 100 billion yen, the Nikkei reported, without saying where it got the information. A number of foreign funds chose not to join the proposal due to expectations of low returns, he added.

A Toshiba representative declined to comment to Reuters, saying the company could not “respond to information about applicants, including co-investors, as it may compromise the fairness of the process.”

Investors’ attention may now turn to another potential bidder, state-backed fund JIC, which sources say is also preparing a bid.

The JIC fund has reportedly been in talks with US private equity fund Bain Capital and North Asian fund MBK Partners to form a separate consortium, sources said.

It should be noted that JIP and state-backed JIC had previously partnered in a first round of bidding for Toshiba earlier this year, but then parted ways for the second round.

accounting scandal

Toshiba has been looking for a way forward after years of accounting scandals and mismanagement that began seven years ago.

In 2015, Toshiba was hit by a major accounting scandal and faced delisting – a crisis that led to foreign shareholders owning more than half of the company, including activist shareholders such as Elliott Management, Third Point and Farallon.

And such was the crisis that enveloped the conglomerate, it tried many options to secure its future.

For example, Toshiba sold assets such as medical devices, personal computers, consumer electronics and its US nuclear power plant, Westinghouse Electric, which declared bankruptcy in 2017.

In August 2021, he began talking with a number of private equity firms as he explored his future options.

Then, in November last year, Toshiba revealed plans to split into three separate companies.

The plan, which Toshiba hoped to complete by March 2024, would result in the creation of an infrastructure-focused unit and another unit focused on electronic devices such as power semiconductors.

Buyout offers

But Toshiba’s largest shareholder (Effissimo Capital Management), as well as an influential proxy advisory firm (Institutional Shareholder Services), signaled in March 2022 their opposition to the breakup of the veteran Japanese conglomerate.

This refusal by investors in March to approve break-up or reorganization proposals presented by Toshiba management left the company without a clear path.

In April, Toshiba announced that it would seek purchase offers, including a potential takeover.

And there seems to have been some interest.

In early June, Toshiba said it had received eight takeover offers and two offers from capital alliances that would allow it to remain listed on the stock exchange.

Later in June, Toshiba shareholders approved the addition of two board members from major activist investors, giving momentum to potential buyout plans.

Toshiba has also previously said it will consider the possibility of privatization, although the company’s chief executive has insisted the company will explore all options.

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