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Toshiba accepts JIP's $15 billion buyout bid

Friday, March 24, 2023

Toshiba Corp. said Thursday it has agreed to accept a buyout offer from a consortium led by Tokyo-based fund Japan Industrial Partners Inc., in a deal expected to be worth about 2 trillion yen ($15 billion).

The JIP-led group plans to launch a tender offer in late July to buy Toshiba shares for 4,620 yen each from existing shareholders and delist the company, the conglomerate said. The group also plans to relist Toshiba after raising the company's corporate value, sources familiar with the matter said.

The offer price compares to Toshiba's closing price Thursday on the Tokyo Stock Exchange of 4,213 yen. This puts the company's market capitalization at 1.82 trillion yen.

The consortium includes about 20 Japanese companies such as Orix Corp. and Rohm Co. A group of banks including Sumitomo Mitsui Banking Corp. is expected to finance the deal.

The agreement will conclude the long-running takeover process, which began in April last year after Toshiba said it was looking for bidders in an effort to cut ties with activist shareholders seeking short-term shareholder returns.

Toshiba had been under strong pressure to increase its corporate value from activist investors since a buyout offer from British private equity firm CVC Capital Partners surfaced in 2021.

The Japanese company had attracted around 10 offers, which were eventually narrowed down to two consortiums -- one led by JIP and the other by Japan Investment Corp., a government-backed fund.

Toshiba selected the JIP-led consortium as the preferred bidder in October. The JIP subsequently secured bank loans that totaled 1.4 trillion yen for the takeover.

With the acceptance of the buyout offer, the next focus will be to see if activist shareholders agree to sell their Toshiba shares.

If they do, it will enable Toshiba and the consortium to focus on rebuilding the company without pressure from demanding shareholders, analysts say.

Toshiba's 12-member board, which includes 2 representatives from activist funds, agreed unanimously on the offer, according to the sources.

While Toshiba has agreed to the buyout offer, it will not go so far as to recommend existing shareholders to sell their holdings at the current offer price, saying it is lower than the company had hoped for and that no other bidders came up with a competitive offer.

The tender offer will be called off if the consortium fails to buy at least 66.7 percent of the outstanding shares, Toshiba said.

Toshiba has been struggling to recover from a spate of problems in the 2010s, including a scandal in which it overstated profits through misrepresented financial filings. It also incurred massive losses in its U.S. nuclear business in the same period.

The company in 2017 increased its capital through a third-party allotment of new shares totaling about 600 billion yen to eliminate its excess liabilities and stay listed, leading to activist shareholders investing in the company.

By: DocMemory
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