Japan Toshiba
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Toshiba receives ¥2 tril acquisition offer from global fund

24 Comments
By YURI KAGEYAMA

Toshiba Corp says it is considering a preliminary acquisition proposal that would take the technology conglomerate private.

Toshiba said Wednesday that it asked for more details on the proposal it received on Tuesday, was giving it "careful consideration" and would make an announcement "in due course."

Trading in the company's shares was suspended.

The major Japanese financial newspaper Nikkei reported CVC Capital Partners was looking into acquiring the company for 2 trillion yen ($18 billion).

CVC is an international private equity and credit company, which has committed nearly $162 billion in funds, managing more than 300 investors. It declined to comment. It's headquartered in Luxembourg, and its main office is in London, according to the company.

Toshiba, founded in 1875, was long revered as one of Japan's most respected brands, developing the nation's first radar and microwaves, electric rice cookers and laptop computers. It also invented flash memory, the ubiquitous computer chips that store and retain data for digital cameras, cell phones and other gadgets. Toshiba no longer makes laptops and it has sold its computer chips division.

Toshiba's sprawling businesses, besides nuclear power, include railways, elevators and storage for digital data.

Last month, Toshiba held a general shareholders' meeting, and approved a proposal from Effissimo Capital Management, a major shareholder, to appoint independent investigators to look into possible interference last year with shareholders' voting rights. Company management had opposed the proposal.

The move by CVC to make Toshiba a private company, if realized, would help quiet dissenting voices from shareholders. Toshiba President Nobuaki Kurumatani previously served as the head of CVC in Japan before taking his post at Toshiba in 2018. Japanese media quoted him as saying a board meeting will be held, but he did not say when.

Atul Goyal, analyst with Jefferies, noted the reported offer is at a premium, but launching a tender offer will require regulatory and government approval.

"Privatization could be positive as it may provide Toshiba much needed flexibility and cover from limelight," Goyal said, adding, "It is not a done deal."

In recent years, Toshiba has been dogged by ethical questions and has been mired in scandals. In 2015, Toshiba acknowledged it had been systematically falsifying its books since 2008, as managers tried to meet overly ambitious targets. An outside investigation found it had inflated its profits and hidden massive expenses.

Toshiba invested heavily in nuclear power. But after the March 2011 nuclear disaster in Fukushima, costs of the business ballooned because of growing safety concerns and a souring of sentiment toward nuclear power in countries like Germany.

After Toshiba had acquired Westinghouse in 2006 with much fanfare, the U.S. nuclear unit filed for bankruptcy protection in 2017.

Toshiba is now tasked with decommissioning nuclear plants in Japan, including the one in Fukushima, where critical tsunami damage set off reactor meltdowns.

For the nine months through December, Toshiba returned to a profit of 43.6 billion yen ($396 million), a reversal from the 145.6 billion yen loss racked up the previous year over the same period. It reports results for the fiscal year in May.

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24 Comments
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Toshiba stocks go brrrrrrrrrr!!

3 ( +4 / -1 )

Wow. A foreign private equity firm taking over a nationally treasured brand. Interesting to see if this will be blocked by MITI.

11 ( +12 / -1 )

I cannot imagine the Japanese regulators, the main banks, or the management of the firm (who routinely think of it as their company) going along with allowing a foreign fund to take over a tech giant.

And that 300 investors (honestly I thought it was a typo) could amass 162 billion USD in capital shows the extent of wealth inequality, but that is a different issue.

16 ( +19 / -3 )

It's merely a matter of time that we will see other Japanese keiretsus following suit under either Western or Chinese acquisition.

Wow. A foreign private equity firm taking over a nationally treasured brand. Interesting to see if this will be blocked by MITI.

MITI no longer exists. Toshiba is pretty much fangless these days, so I don't think there are many economic values left for a Japanese government's rescue.

15 ( +17 / -2 )

Why not? Worked out well for Nissan Motors.

6 ( +8 / -2 )

Resutora time?

0 ( +1 / -1 )

Stock jumped 20% on rumor.

CVC Capital Partners is a private equity and investment advisory firm with approximately US$111 billion in secured commitments. Head Office is in Luxembourg.

2 ( +2 / -0 )

These equity and credit fund companies are only there to maximize their own profits. They will liquidate Toshiba as soon as it becomes a burden for them

13 ( +14 / -1 )

Imagine the layoffs. Imagine the resistance by mgt. Oh, that would make Nissan look like a cakewalk.

10 ( +10 / -0 )

They’ll want more money than that for it.

2 ( +3 / -1 )

If you are a 50+ year old manager at Toshiba I suggest you get out the 30 year old box from your college days and dust off the antique resume you applied to Toshiba with, snap a new picture and start gatling gunning your resume. I worked at a smaller company that was taken over and made private by an investment fund, and they will relentlessly gut it and sell off the parts.

8 ( +9 / -1 )

That’s nothing we here decide...lol But, just imagine you were one of the few upper level owners or participants, let’s say a board member, a well-paid manager with some stock options, a creditor (banker), or any significant stock holder. Of course you would immediately take the offered money from that investment fund like a gold shower and make yourself comfortable for the few time left until corona kills you or anything else happens like a later bankruptcy anyway. Would you instead wait for an unsure company’s recovery and be happy with only small win prospects of daily ups and downs of the stock exchange values around zero, like a sine curve, a bit above zero, next day a bit in minus? No, you quite surely wouldn’t either. lol

1 ( +2 / -1 )

CVC is an international private equity and credit company, which has committed nearly $162 billion in funds, managing more than 300 investors. It declined to comment.

No it isn't! It is a corporate Raider that will asset strip Toshiba.

6 ( +8 / -2 )

I hope that they have done or will do a thorough due diligence. Who knows what skeletons, bad debts and bad accounts are still on the Toshiba books?

3 ( +3 / -0 )

What's (shockingly) not even mentioned in the article is that the current CEO of Toshiba is a former senior executive of CVC. He was initially brought in to shake things up, and if he's going this route I can only guess the resistance he felt to change was too entrenched. Taking it private will allow for the necessary restructuring, but as one of the old-guard lifetime-employment big players in Japan, it will certainly be interesting to watch this clash of cultures play out.

4 ( +4 / -0 )

CVC are vultures who will pick Toshiba's carcass clean and move on with their profits. Maybe that's what it'll take to shake up the other under-performing old line companies, but I wouldn't hold my breath. Despite the performance of the Nikkei over the past several years, it's really hard to identify any new services, technologies or products that been the drivers, and it hasn't been down to M&A, either...

7 ( +8 / -1 )

End result of which is like the lyrics “the rich get richer, and the poor get poorer”.... Capitalism at its ugly finest.

1 ( +3 / -2 )

"The removal of the 145-year-old Toshiba from the Tokyo Stock Exchange in a foreign-led deal would be a hugely symbolic move, said advisers directly involved with the conglomerate, after years of increased activism and acquisitions by overseas funds. "

"US private equity firms such as Bain and KKR view Japan as one of the most target-rich markets in the world"

"Although the deal was completed quickly, it left Toshiba’s shareholder register heavily populated with foreign activist funds — groups that may see the opportunity for a lucrative exit if the CVC deal is completed at a large premium. "

i.e. Corporate vultures at play.

However, no deal will be sealed unless the Japanese Government says so.

" A bid by a non-Japanese private equity fund would also require approval from the Japanese government. A takeover of Toshiba would be particularly sensitive because it operates the country’s nuclear plants."

Thus, better wait before gloating.

"https://www.ft.com/content/20004088-8007-4715-9199-45f681ae307b"

-3 ( +3 / -6 )

Atul Goyal, analyst with Jefferies, noted the reported offer is at a premium, but launching a tender offer will require regulatory and government approval.

Which will never happen.

-6 ( +1 / -7 )

CVC are ultraglobalist banksters same as Blackrock, they will eventually destroy Toshiba's real production. Japan should prohibit this acquisition if it wants to remain industrial country.

-4 ( +4 / -8 )

Although this might seem useful for Toshiba management, given its issues, I'd be surprised if this squeezed past the new raft of foreign ownership rules. As Mezane points out, the memory of Nissan's buyout is still quite fresh.

The JPG did let a Taiwanese outfit buy Sharp though, and the FOR are primarily to stop Chinese companies progressively buying Japanese companies, properties and land. Plus it's a payday for senior Toshiba folk and shareholders, so they'd be happy.

If I had $18bn, I'm not sure I'd spend it on Toshiba. JP companies can be quite opaque when it comes to due diligence. Will they be able to asset strip it as easily as they would a Western company, keeping the good stuff and flogging off the rest, closing plants in Japan and sacking staff? Alternatively, $18bn buys you a lot of early stage start-ups.

-US private equity firms ... view Japan as one of the most target-rich markets in the world.

US companies used to see China as the promised land. That didn't work out quite so well. Not sure this will either. Some corporate culture clashes can lead to mutually assured destruction.

8 ( +8 / -0 )

If it comes to Toshiba attempting to sell to a murky foreign equity firm, the J-govt should put the brakes on the sale. Not in the national interest. For all we know, parts of that scam equity firm may be owned by Communist China.

Nationalize Toshiba by purchasing it, if it comes to that, and the Japanese gov't can run the Corporation in the nations intetests.

12 ( +15 / -3 )

If the buyout is accepted then I will gladly take the position of head hatchet man i.e. the new CEO.

0 ( +0 / -0 )

Maybe the NIKKEI is high because Bank of Japan is buying tons due to quantitive easing?

Did Japan throw Toshiba under the bus? The nuclear industry and Westinghouse in particular were not in great shape. Somehow Japan wanted export nuclear reactors. This was always going to be a hard sell - even with the Japanese government behind them. Toshiba grossly overpaid for Westinghouse. The Westinghouse bankruptcy. The 3/11 Earthquake and resulting meltdown in Fukushima. Further improprieties at Toshiba.

0 ( +0 / -0 )

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