Toshiba said on Thursday that a $14 billion tender offer from private equity firm Japan Industrial Partners (JIP) had succeeded – a deal that paves the way for the embattled industrial conglomerate to go private. JIP’s buyout bid will delist the 148-year-old electronics giant and put it in domestic hands after years of battles with overseas activist investors. It also would end a management dispute over how the company should be run. With commitment letters of investment and lending from banks totaling more than Y=2trn ($10.6bn), the preferred bidder is expected to retain CEO Taro Shimada and his team.
The TB Investment Limited Partnership consortium, consisting of four funds managed by JIP and 17 Japanese companies, including financial firm Orix Corp and semiconductor maker Rohm Co, offered Y=4,620 per share, the highest possible under current share prices. The firm must obtain a minimum of 288,564,300 shares, or 66.7% of Toshiba’s outstanding stock, for the takeover to succeed. The tender offer period runs through Nov. 20, and the consortium will submit its bid to shareholders for approval in December.
If the offer is successful, it will be Japan’s biggest PE-backed takeover of a listed company and one of the largest in the world. It could also be the last major PE-backed deal involving a Japanese firm because of strict regulations on foreign ownership of sensitive infrastructure and technology firms. Japan’s national security laws require overseas investors to get government approval before acquiring more than 1% of a company whose business includes nuclear power, defense-related equipment, or semiconductors.
JIP, which did not disclose the names of its investor partners, has a track record of carve-outs and spin-offs from large Japanese conglomerates. It has previously taken control of companies such as camera maker Olympus and laptop computer manufacturer Sony.
The firm has already agreed to purchase a stake of more than two-thirds in Toshiba from some of its top shareholders, including activist fund Effissimo Capital Management. JIP said it would consider relisting the firm in the future after boosting its value with stable shareholder support and strengthening its strategy of high-margin digital services.
JIP’s success in securing bank financing for the takeover could be crucial to its efforts to revive the company. Despite the resounding win, some analysts have concerns about the size of the investment and the consortium’s ability to turn around Toshiba.
Some doubts have been raised about whether JIP has the necessary expertise and track record to make Toshiba profitable, mainly because many Japanese companies in the bidding consortium have past links with the electronics giant. There are also questions about the quality of the bid, given that it is significantly below the market price for the company. Some investors also worry that a Japanese-led group would be less willing to pursue radical changes in the company. It has struggled with scandals and losses since 2015, when it overstated revenues by $1.2bn for seven years.
