Japan’s Toshiba Corp (6502.T) said on Thursday its board of directors has decided to recommend shareholders take up a tender offer from a consortium led by private-equity firm Japan Industrial Partners (JIP). The move sheds some light on the path forward for the scandal-ridden conglomerate, which has struggled recently. The board earlier this year accepted a buyout offer valued at around 2 trillion yen ($14.29 billion), which is expected to be backed by local firms, including Orix Corp and Chubu Electric Power Co, as well as banks such as Sumitomo Mitsui Banking Corp.
A successful deal would mark a turning point for the storied industrial conglomerate, plagued by financial losses, corporate governance scandals, and even a near-delisting from Tokyo Stock Exchange. It also would put the company firmly back in domestic hands, ending months of tension with activist investors and the board.
The company has been struggling for years to revive its business and keep up with the competition, as it is weighed down by debt and management issues. Its shares have fallen more than a quarter this year, underperforming a 2.2% fall in the Nikkei 225 index.
Its troubles began in 2015 when it disclosed accounting malpractices across multiple divisions, revealing the firm had overstated pretax profit by 230 billion yen over seven years. The problems worsened in 2016 when it announced a charge of several billion dollars related to U.S. unit Westinghouse Electric LLC’s nuclear power plant construction business.
In 2022, it set up a strategic review to consider whether to go private, following pressure from investors. But it ran into trouble when shareholders rejected a plan to split the firm into three and then two companies and a proposal for it to solicit competitive buyout bids was defeated by activists at an extraordinary shareholder meeting.
Despite the failure of these plans, Toshiba’s board kept its door open for interested parties. It started an auction process in July, which saw four bidders — including private equity firms Bain Capital and CVC Capital Partners, and state-backed Japan Investment Corp (JIC) — reach a second round of bidding. In October, JIP’s consortium was granted preferred bidder status.
JIP has said it would be willing to pay up to 4,620 yen a share for the remaining shares of Toshiba, valuing the conglomerate at around $21.4 billion. Its offer price represents just a 9.7% premium over Thursday’s closing price, meaning it’s unlikely that activist funds will be satisfied with its terms.
But the company is leaving itself wiggle room to change its mind before the tender offer opens in late July. While it isn’t allowed to solicit counter or competitive bids, it can assess proposals received as they are submitted. It can then decide to reject them, accept a new one, or change the current one. It could also delay the tender offer if it deems necessary for the business’s future.
