In A Deal Valued At $15 Billion, Toshiba Has Accepted A Buyout Bid From The Japan Consortium

Toshiba Corp. accepted a buyout offer from a Japanese consortium, bringing the iconic conglomerate one step closer to completing a difficult chapter in its more-than-140-year history.

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The board of directors of the Tokyo-based company approved a bid of about 2 trillion yen ($15.3 billion) from a group led by domestic private equity firm Japan Industrial Partners Inc., or 4,620 yen per share, on Thursday, according to a statement. The offer represents a 9.7% premium to Toshiba's Thursday closing price.

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A tender offer is likely to begin in late July, with the specific timing to be published later, according to the firm.

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Toshiba announced that the purchase will involve seventeen Japanese corporations and six local financial institutions. Orix Corp., Rohm Co., and Chubu Electric Power Co. are among the companies named in the statement, according to TradE Algo.

The move might put an end to years of turmoil at the renowned Japanese corporation, which has been plagued by scandals that have forced it to seek a buyer. 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 maximize returns and the Japanese government prioritizing keeping sensitive technologies and businesses out of foreign hands.

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"Having a resolution here would be good," said Mio Kato, an analyst at LightStream Research. "One of Toshiba's challenges has been a lack of a clear approach owing to the continual changes of direction." But, "some work remains to be done in terms of generating new growth drivers and leveraging the potential of some of the nascent firms."

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The saga has become a case study in corporate governance in Japan, as some notable activist investors recognized an opportunity and invested in the firm. Elliott Management Corp., Seth Fischer's Oasis Management Co., and Singapore-based firms Effissimo Capital Management Pte and 3D Investment Partners Pte were among them.

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And several of the world's largest private equity companies, including Bain Capital, CVC Capital Partners, and KKR & Co., contemplated considering takeover approaches.

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The nuclear power industry of Toshiba is regarded as critical to national security. It is involved in the decommissioning of the Fukushima Dai-Ichi nuclear power station, which was destroyed in the 2011 earthquake, tsunami, and nuclear meltdowns. As a result, the government found it difficult to accept a transfer of ownership to an international corporation.

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Before a drop in demand for memory chips and hard drives, the consortium offered as much as 5,500 yen per share, according to Toshiba. Nevertheless, JIP has decreased its bid many times since then, citing poor market circumstances, difficulties in obtaining finance, and a reduction in Toshiba's profit projection.

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If the purchase goes through, it will be one of the largest Asian deals this year, despite a drop in deal activity. It will also be one of the largest private equity-led buyouts in Japanese history.

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The road to the board's approval has not been easy. Bloomberg News reported that the JIP-led consortium experienced challenges acquiring funding as banks were increasingly wary about giving cash for huge projects in a less favorable economic climate.

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During the last eight years, Toshiba has lurched from catastrophe to disaster, beginning with an accounting scandal in 2015 that decimated profitability and forced a company-wide reorganization. The ensuing unraveling of an expensive excursion into the nuclear power market in the United States resulted in a $6.3 billion writedown, putting it on the verge of delisting. It was compelled to sell its crown jewel memory chip plant and issue shares, which were quickly purchased by foreign investors.

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Stockholders and management have argued over the company's destiny since then. When Effissimo attempted to appoint one of its co-founders and other candidates to Toshiba's board of directors in 2020, shareholders rejected the proposal. Concerned about how the voting was conducted, Effissimo recommended appointing independent investigators to investigate it, winning a record shareholder vote in 2021. According to the investigation's findings, Toshiba executives colluded with government friends to influence the outcome.

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Stockholders rejected a plan by management to split the firm in two early last year, as an alternative to selling the conglomerate to private equity, as investors had requested. The failure of that strategy triggered a search for strategic options for Toshiba's future, including the possibility of a sale. In October, JIP was chosen as the preferred bidder.

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Hidemi Moue, the buyout fund's current chief executive officer, created JIP in Tokyo in 2002. He started his career with Industrial Bank of Japan Ltd., one of the firms that merged in 2000 to establish Mizuho Financial Group Ltd. JIP has carved away businesses considered peripheral by their parents, and is best known for purchasing PC maker Vaio Corp. from Sony Group Corp. in 2014.

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