JIP-led consortium completes Toshiba tender offer

Approximately 340.5m shares – 78.5% of the total issued shares – were tendered, comfortably exceeding the minimum acceptance threshold of 288.6m shares, according to a filing. The consortium paid JPY 4,620 per share, which represents a 9.4% premium to the closing price on March 22, immediately prior to Toshiba’s board approving the tender offer.

The price also represents a 20.6% premium to the closing price on April 6, 2021. That was when Toshiba’s governance issues were escalating, and CVC Capital Partners effectively put the company into play by tabling a tentative offer – at a valuation of USD 20bn – and then stepping back.

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 cut back, 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.

The investor consortium comprises multiple funds managed by JIP, 17 Japanese companies, one overseas company, and an unspecified number of institutional co-investors. Several Japanese corporates have announced commitments to the transaction, including Rohm Semiconductor, automotive component supplier Niterra, and Chubu Electric Power.

Chubu recently disclosed it that would contribute JPY 100bn to the privatisation as an LP. The company added that, following the close of the transaction, domestic LPs would hold about three-quarters of Toshiba’s ordinary shares. The remaining one quarter would be held by foreign LPs via an investment fund which will be operated and managed by Brick Lane Partners.

Toshiba is already responsible for the largest private equity investment in Asia – the 2018 carve out of Toshiba Memory Corporation, now called Kioxia. 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. Toshiba invested in the acquisition vehicle and retained a 39.6% stake in the business.

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 3.53trn in sales and other income for the 12 months ended March 2023, up from JPY 3.45trn in 2022. Net profit fell to JPY 126.6bn from JPY 194.7bn.

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