JIP submits buyout offer for Toshiba

The confirmation came in response to Nikkei report that JIP had submitted an offer of JPY 2trn (USD 14.2bn), supported by a syndicated loan of JPY 1.2trn. The private equity firm is said to have assembled a consortium of 20 Japanese companies, including Orix Corporation, semiconductor manufacturer Rohm, and Chubu Electric Power.

Toshiba said in a statement that it would assess the proposal, adding that no assurance can be given regarding the consummation of a transaction, whether it takes the form of a take-private or something else and whether it involves JIP or other investors.

JIP was founded in 2002 when corporate Japan was undergoing widespread restructuring in the aftermath of the Asian financial crisis. It has acquired assets from NEC Group, Nippon Steel, Toyota Motor Corporation, Asahi Glass, Yamaha Corporation, Olympus Group, and Sony Corporation. NEC especially has proved a rich source of carve-outs.

In 2017, JIP teamed up with KKR on a JPY 322bn tender offer for Hitachi Kokusai Electric. Going solo on the deal wasn’t an option because the firm’s fund was only JPY 67.4bn. A desire to pursue larger opportunities without relying on partners prompted JIP to raise JPY 148.5bn for its fifth fund, which included a JPY 46.2bn co-investment vehicle, in 2018.

Nevertheless, last year the firm closed a JPY 816.8bn tender offer for Hitachi Metals, working with Bain Capital and Japan Industrial Solutions – the second-largest PE buyout completed in Japan after the Bain-led purchase of Toshiba Memory Corporation, now known as Kioxia, for JPY 2trn in 2018.

Toshiba’s troubles date back to the bankruptcy of its Westinghouse nuclear power unit in 2017. This led to various disposals – including Toshiba Memory Corporation – and a widely distributed share issue that allowed activist investors to build up significant positions.

CVC Capital Partners made a tentative USD 20bn offer in April 2021 and then stepped back, awaiting guidance as to whether privatisation was desirable. Shortly thereafter, shareholders approved an investigation into alleged misbehaviour at the company’s 2020 annual general meeting. The probe found evidence of government collusion to rig voting, and four senior executives were removed.

Last March, shareholders defied board guidance and voted against a proposal for a two-way spinoff that would have seen the company’s devices and semiconductor business become an independent entity. Two months later, two executives backed by activist investors Farallon Capital Management and Elliott Management were elected to the board to oversee a transparent sale process.

Toshiba posted JPY 3.34trn in sales for the 12 months ended March 2022, up from JPY 3.05trn in 2021. Net income rose from JPY 113.9bn to JPY 194.6bn. This compares to a loss of JPY 114.5bn in 2020. In 2018, revenue and net profit came to JPY 3.95trn and JPY 819.2bn.

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• Topics
• North Asia
• Buyouts
• Industrials
• Japan
• Japan Industrial Partners