Toshiba Approves $14bn Private Equity Takeover

The long running ownership and financial saga surrounding Toshiba seems to be nearing a final resolution.

In November 2022 a consortium led by private equity firm Japan Industrial Partners (JIP) submitted a 2.2 trillion yen ($15 billion) offer for the Japanese conglomerate, subject to approval by Toshiba.

Nearly a year later, Toshiba announced that a $14 billion tender offer from Japan Industrial Partners (JIP) has been successful – paving the way for the embattled industrial conglomerate to go private.

Toshiba buyout

“…as a result of the Tender Offer, it is expected that the parent company and the largest shareholder among the major shareholders of the Company will change as of September 27, 2023 (the settlement commencement date of the Tender Offer),” said Toshiba in its announcement.

Reuters meanwhile reported that the JIP-led consortium saw 78.65 percent of Toshiba shares tendered, giving the group a majority of more than two-thirds, which would be enough to squeeze out remaining shareholders.

The deal puts the 148-year-old Japanese conglomerate in domestic hands after years of battles with overseas activist investors. Toshiba is set to be delisted as early as in December, Reuters reported.

JIP’s consortium includes 20 Japanese companies, led by chipmaker Rohm, financial services firm Orix and Chubu Electric Power.

“Activist shareholders and Toshiba were stuck with each other for years. This takeover allows both sides to escape their mutual bearhug,” analyst Travis Lundy of Quiddity Advisors, was quoted by Reuters as saying.

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

“We are deeply grateful to many of our shareholders for being understanding of the company’s position,” Toshiba chief executive Taro Shimada was quoted by Reuters as saying in a statement on Thursday. Toshiba “will now take a major step toward a new future with a new shareholder,” he added.

JIP reportedly plans to retain the services of CEO Shimada.

Accounting scandal

Toshiba has been seeking a way forward after years of accounting and mismanagement scandals that began eight years ago.

Back in 2015, Toshiba was hit by a major accounting scandal and faced a possible delisting – a crisis that resulted in foreign-based shareholders owning more than half of the company, including activist shareholders such as Elliott Management, Third Point and Farallon.

And such was the crisis that enveloped the conglomerate, it attempted many options to secure its future.

For example Toshiba sold off assets such as medical devices, personal computers, consumer electronics and its US nuclear power unit, Westinghouse Electric, which declared bankruptcy in 2017.

In August 2021 it began talking with a number of private equity firms as it explored its future options.

Then in November 2021 Toshiba revealed plans to break itself up into three separate companies.

The plan, which Toshiba hoped to complete by March 2024, would result in the creation of one unit focused on infrastructure and another unit focused on electronic devices such as power semiconductors.

Buyout offers

But Toshiba’s top shareholder (Effissimo Capital Management), as well as an influential proxy advisory firm (Institutional Shareholder Services), in March 2022 signalled their opposition to the breakup of the veteran Japanese conglomerate.

That investor refusal in March to approve either the breakup or reorganisation proposals presented by Toshiba’s management, left the company without a clear way forward.

In April 2022 Toshiba said it would solicit deal offers, including a potential buyout.

In early June 2022 Toshiba said it had received eight buyout offers and two offers of capital alliances that would see it remain as a listed entity.

Later in June 2022, Toshiba shareholders approved the addition of two board members from large activist investors, which added momentum to potential buyout plans.

Toshiba has also previously said it would consider the possibility of privatisation, although the company’s chief executive insisted the firm would study all options.