Toshiba to Delist: Outcomes of Management Stabilization to Be in Spotlight

A tender offer that will delist Toshiba Corp. has been successfully completed. Taking the company private will allow for greater management freedom. Long-standing chaos in Toshiba’s management must be stabilized as quickly as possible.

Toshiba has announced that shareholders with about 80% of shares with voting rights have tendered their shares in the takeover bid by a consortium of Japanese companies led by domestic investment fund Japan Industrial Partners, Inc. It satisfied the two-thirds majority requirement for the bid to be successfully completed.

After going through the procedures at Toshiba’s extraordinary shareholders meeting, the JIP consortium will also purchase shares from shareholders who did not accept the tender offer. The total purchase price will be upwards of ¥2 trillion.

The JIP consortium plans to make Toshiba its wholly owned subsidiary by the end of this year. Toshiba’s shares will be delisted for the first time since they were listed in 1949.

Toshiba is one of Japan’s prominent brand-name enterprises, and it is an unusual move for such a large company to choose to be delisted in a bid to change its shareholder composition. The question will be whether this result will lead to Toshiba steadily rebuilding its management.

Toshiba’s management has continued to take a meandering course since its inappropriate accounting scandal broke in 2015. After suffering huge losses in its nuclear power generation business in the United States, resulting in excessive debt in 2017, the company received a ¥600 billion capital injection from investors, including activist shareholders who pressed hard for management reforms.

Subsequently, Toshiba’s management team was confronted by the demand from the activist shareholders for short-term profit returns. The president and chairman of the board of directors were forced to step down, and management fell into turmoil.

By going private, the company will be free from such pressure. It will also make it easier to build growth strategies from a medium- to long-term perspective.

However, there are still many issues to be addressed. As a result of the sale of a slew of businesses from home appliances to medical equipment, Toshiba’s consolidated net sales for its business year ended March 2023 fell by nearly 60% from its peak in its business year ended March 2008.

Toshiba has positioned as its pillars data-related businesses that analyze large volumes of data to support companies, renewable energy, and infrastructure business such as railroads, among others, but it has yet to clearly show a concrete path to growth.

About 20 companies with close ties to Toshiba’s business, including Chubu Electric Power Co., which operates nuclear power plants, and Rohm Co., a major semiconductor company, are participating in the JIP consortium and will help fund the company. Coordinating opinions with these companies will be essential.

Toshiba has critical economic security businesses, including nuclear power and defense-related businesses. This is probably one of the reasons why many domestic companies have joined hands in a support package.

Toshiba’s management team must make the most of the benefits of going private to stabilize its management.

(From The Yomiuri Shimbun, Sept. 25, 2023)