Toshiba Buyout Proposal Faces Increasing Uncertainty

Jiji Press

10:30 JST, March 1, 2023

TOKYO (Jiji Press) — The proposed acquisition of Toshiba Corp. faces increasing uncertainty as the company has been hit by deteriorating profitability and the departure of a key official.

It is unclear whether activist shareholders, including foreign investment funds, will agree to a 2-trillion-yen buyout proposed by a consortium led by investment fund Japan Industrial Partners Inc.

Major shareholders of the electronics and machinery giant include activist shareholders that acquired Toshiba shares issued in a third-party allotment in 2017, when the company was in a business crisis.

The price proposed by the JIP-led consortium translates into ¥5,000 per share, exceeding ¥2,628, the 2017 issue price adjusted for a reverse split. But it falls short of ¥5,938, Toshiba’s high for 2022.

The proposed price is “disappointing,” a major shareholder said. A Toshiba source said the company “cannot be sold at such a [low] price.”

On Feb. 14, Toshiba lowered its consolidated earnings estimates for fiscal 2022 ending in March, announcing the second downward revision to the year’s operating profit projection.

Toshiba’s operating profit is now estimated at ¥95 billion, down some 40% from the previous year.

“There is no scope to raise” the purchase price, an official from the JIP-led group said.

To buy Toshiba, JIP plans to take out up to ¥1.4 trillion in loans from banks, which would add to investments by some 20 domestic companies.

The banks are expected to increase pressure on the consortium if Toshiba cannot pave the way for an earnings recovery.

On Feb. 14, Toshiba Corporate Senior Executive Vice President Goro Yanase, the only Toshiba board director who worked for the Toshiba group throughout his business career, resigned due to inappropriate use of social expenses.

Yanase “played some part in the [acquisition] negotiation process,” Corporate Executive Vice President Masayoshi Hirata said.

Due to the exit of Yanase, the negotiations “are expected to take some more time,” a source linked to the talks said.

A tender offer for the acquisition was to be completed by the end of March. Toshiba now expects that the procedure will end in fiscal 2023.