The board of Toshiba Corp. has approved a purchase bid from a group led by private equity firm Japan Industrial Partners, the company announced on Thursday. The offer values the company at 2 trillion yen ($15.2 billion).
After the conflict with foreign activist shareholders, a successful merger would see the scandal-ridden industrial conglomerate go private and securely in domestic hands.
But it’s still unclear whether activist funds, which are said to own about 25% of the corporation, will be happy with the terms.
According to insiders, 20 Japanese corporations plan to participate in the deal, including Chubu Electric Power, chipmaker Rohm Co, and financial services company Orix Corp. According to Refinitiv, it would be the third-largest M&A deal worldwide thus far this year.
“This puts a stop to years of uncertainty over the Board’s perception of the appropriate price and months of doubt regarding whether a deal was imminent,” said analyst Travis Lundy of Quiddity Advisers, who writes for Smartkarma.
Even if the outcome is not what the activists had hoped for, it would still offer many of them a route out. The key question is whether “Toshiba Fatigue” can withstand price disappointment.
Since 2015, Toshiba, a large conglomerate that also owns 40.6% of the memory chip manufacturer Kioxia Holdings, has been hit hard by accounting scandals and significant losses. The company even came dangerously close to being delisted before becoming embroiled in a string of corporate governance scandals.
When the company was at its lowest point, an investigation commissioned by shareholders found Toshiba had conspired with the Japanese trade ministry, which views the company’s nuclear and defense technology as a strategic asset, to prevent foreign investors from participating in the 2020 shareholders meeting.
The strategic review and the buyout proposal were ultimately brought about by the aftermath of that disaster.
Almost a year ago, Toshiba began an auction procedure that resulted in eight initial buyout approaches and two capital alliance offers.
According to sources, four bidders—including the private equity companies Bain Capital, CVC Capital Partners, and Brookfield Asset Management—moved on to the second round.
JIP initially collaborated with the government-backed Japan Investment Corp (JIC), but the two organizations ultimately opted to part ways over conflicts regarding management retention and restructuring strategies.
Last month, the JIP consortium filed a legally binding takeover offer supported by $10.6 billion in loan pledges from significant banks.
It has taken weeks for the board to move forward with a vote on JIP’s bid because, according to reports, several board members were not happy with its offer price.
Over the past year, Toshiba stock has dropped by 12%, underperforming the Nikkei 225 average’s dip of 2.2%.
