Toshiba's $14 billion deal paves the way for privatisation

  • Industry News
  • Sep 22,23
Toshiba announced the successful conclusion of a $14 billion tender offer from the private equity firm Japan Industrial Partners (JIP).
Toshiba's $14 billion deal paves the way for privatisation

After enduring years of battles with overseas activist investors, Toshiba announced the successful conclusion of a $14 billion tender offer from the private equity firm Japan Industrial Partners (JIP), according to Reuters. This landmark deal clears the path for the beleaguered industrial conglomerate to transition into a private entity.

The consortium led by JIP managed to secure 78.65% of Toshiba shares through the tender offer, granting them a commanding majority exceeding two-thirds, which enables them to buy out the remaining shareholders, as reported by Reuters.

This pivotal agreement not only places the 148-year-old electronics-to-power stations manufacturer under domestic control but also paves the way for Toshiba's delisting as early as December, as highlighted by Reuters.

Analyst Travis Lundy from Quiddity Advisors, who contributes to Smartkarma, remarked, "Activist shareholders and Toshiba were stuck with each other for years. This takeover allows both sides to escape their mutual bearhug," according to Reuters.

In March, Toshiba accepted the buyout offer, valuing the industrial conglomerate at 2 trillion yen ($13.5 billion). Although some shareholders expressed dissatisfaction with the price, Toshiba argued that there was no prospect of a higher offer or competing bid, Reuters reported.

Toshiba's Chief Executive, Taro Shimada, expressed gratitude to many shareholders for understanding the company's position, stating, "Toshiba will now take a major step toward a new future with a new shareholder."

The company had cited its complex relationships with various stakeholders, including shareholders with differing opinions, as a hindrance to its business operations. A stable shareholder base was deemed essential to pursue its long-term strategy centred on high-margin digital services, noted the newswire.

JIP intends to retain CEO Shimada, with hopes that aligning management and new ownership will boost morale. However, Lundy emphasised the need for management to present a more compelling narrative to investors moving forward.

Although not widely recognised internationally, JIP has a track record of involvement in corporate carve-outs and spin-offs from Japanese conglomerates, such as Olympus's camera business and Sony Group's laptop computer business.

Since 2015, Toshiba has weathered accounting scandals, substantial losses, and came close to being delisted. The company also faced a series of corporate governance controversies, as reported by the newswire.

JIP's consortium comprises 20 Japanese companies, spearheaded by chipmaker Rohm, financial services firm Orix, and Chubu Electric Power. This transaction will stand as Japan's largest M&A deal of the year, with Japan being the sole major Asian market experiencing growth in mergers and acquisitions, according to LSEG data cited by Reuters. Notably, private equity deals, including the planned $6.4 billion buyout of materials maker JSR by a government-backed fund, have been particularly active in the Japanese market.

Source: Reuters

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