Strategic co-investors commit to JIP's mega Toshiba buyout

Rohm has committed JPY 100bn to the deal and agreed to underwrite a further JPY 200bn of non-voting preferred stock issued by the JIP investment vehicle ahead of the tender offer, according to a filing. Niterra said in a separate filing that it would contribute JPY 25bn. Both expressed interest in collaborating with Toshiba on strategic initiatives.

Rohm manufactures a range of electronic components, but most of its revenue comes from integrated circuits and discrete semiconductor devices. Niterra is best known for producing spark plugs.

In March, when Toshiba’s board approved the tender offer, the investor consortium comprised multiple funds managed by JIP, 17 Japanese companies, one overseas company, and an unspecified number of institutional co-investors. At the time, Orix Corporation, Rohm, and Chubu Electric Power were reported to be among the participants.

The consortium is offering JPY 4,620 per share for all outstanding shares, with a minimum acceptance threshold of 288.6m shares, or a two-thirds stake in the business.

The price represents a 9.4% premium to Toshiba’s March 22 closing price and a 20.6% premium to the April 6, 2021 closing price. The latter date marks the point when CVC Capital Partners effectively put the company into play by tabling a tentative offer – at a valuation of USD 20bn – and then stepping back to await guidance on whether privatisation was desirable.

JIP’s initial proposal, submitted last September, set the price at JPY 5,200-JPY 5,500, which implies an overall valuation of up to JPY 2.38trn. The price was then revised downwards, reflecting downward revisions in Toshiba’s earnings projections, a deterioration in the value of the company’s stake in flash memory business Kioxia, and a JPY 300bn reduction in available debt financing for the deal.

Kioxia was formed in 2018 when a Bain Capital-led consortium carved out Toshiba Memory Corporation. Toshiba invested in the acquisition vehicle and retained a 39.6% stake in the business. It became available because Toshiba was forced to dispose of assets in the wake of the bankruptcy of its Westinghouse nuclear power unit in 2017.

In 2021, not long after CVC entered the fray, Toshiba 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 year, 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 comprises 255 subsidiaries organised across seven principal business domains: energy systems, infrastructure systems, building solutions, retail and printing, electronic devices and storage, digital solutions, and batteries. Electronic devices and storage is the biggest revenue generator.

The company 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
• Co-investment