Toshiba Corp’s board has approved a buyout offer from a consortium led by Japan Industrial Partners, a private equity firm, which values the scandal-ridden industrial conglomerate at JPY 2tn ($15.2bn). The deal would make Toshiba a private company and place it under domestic control following a prolonged period of tension with activist shareholders abroad.
However, it remains uncertain whether the estimated quarter of the company held by activist funds will be satisfied with the terms. The consortium includes about 20 Japanese firms such as Orix Corp, Rohm Co, and Chubu Electric Power. If the deal goes through, it will be the third-largest M&A transaction globally in 2022, according to Refinitiv data.
According to Travis Lundy, an analyst at Quiddity Advisors, the deal will bring an end to months of uncertainty over whether a deal was on the horizon, as well as years of uncertainty regarding the board’s understanding of the correct price. Lundy also commented that while the deal may not have been what some activists had hoped for, it provides them with a way out. The question is whether “Toshiba Fatigue” is powerful enough to overcome their disappointment with the price.
Toshiba Corporation, a large conglomerate that owns 40.6% of memory chip maker Kioxia Holdings, has been facing significant challenges since 2015. The company has been struggling with accounting scandals and heavy losses, and at one point, it was on the verge of being delisted. To make matters worse, Toshiba became embroiled in a series of corporate governance scandals.
One of the most significant scandals involved Toshiba colluding with Japan’s trade ministry to block overseas investors from gaining influence at its 2020 shareholder meeting. A shareholder-commissioned investigation found that the company’s actions were aimed at protecting its nuclear and defense technology, which the ministry sees as a strategic asset.
As a result of this debacle, Toshiba conducted a strategic review that eventually led to the buyout proposal from Japan Industrial Partners. The company started an auction process approximately one year ago and received eight initial buyout proposals and two offers for capital alliances.
According to sources, Bain Capital, CVC Capital Partners, Brookfield Asset Management, and another bidder progressed to the second round of the auction process for Toshiba. Initially, Japan Industrial Partners (JIP) teamed up with Japan Investment Corp (JIC) but they parted ways due to disagreements over management retention and restructuring plans.
However, the JIP consortium submitted a binding buyout proposal with support from major banks worth $10.6 billion last month. It took several weeks for the Toshiba board to vote on JIP’s proposal due to some board members’ dissatisfaction with the offer price. Over the last year, Toshiba shares have declined 12%, which is worse than the Nikkei 225 average’s 2.2% decline.
