Toshiba considers take-private bids

Toshiba will set up a special committee to evaluate potential offers from private equity and other investors, opening the door to a landmark deal to privatize one of Japan’s biggest industrial names.

the committee is likely to get its first deal proposal from Bain Capital, the US private equity firm, which took place last week assured qualified support for a buyout deal from Toshiba’s largest shareholder, Singaporean investment fund Effissimo.

People close to the situation said Bain’s preparations for an offer are at an advanced stage, but they also cited the significant political and technical challenges of privatizing a 146-year-old brand whose businesses range from infrastructure and refrigerators to Nuclear power and defense range.

People close to several large PE funds and likely to be involved in talks with Toshiba said that given the sensitivity surrounding some of its core businesses, a successful buyout deal would require a significant Japanese contingent among its investors.

People close to Toshiba said that although there was strong disagreement within the company on the matter, a growing number of senior figures had concluded that a take-private deal might be the best way for the company to to resolve years of business turmoil and deepening deadlock on activist shareholders.

The announcement from Toshiba, which has a market value of around $17 billion, came late Thursday night. There follows a sharp increase in pressure for such a move from large investors and a letter was sent to Toshiba’s board of directors on Wednesday by the company’s second largest shareholder, 3D Investment Partners.

The decision by Toshiba’s board of directors fires the starting gun for a battle between competing investment syndicates that the company’s vocal investors are hoping for. A strategic review committee convened last year discussed possible takeover deals with a list of PE firms including KKR, Blackstone and Brookfield.

Those talks, considered insufficient by some investors, avoided the issue of price, and the committee concluded in November that none of the PE firms’ proposals were more attractive than the idea of ​​Toshiba splitting into three companies – a plan , which was quickly abandoned after strong shareholder opposition.

The new committee, which Toshiba says will “engage with potential investors and sponsors and review strategic alternatives,” will be composed of Toshiba’s six existing independent directors, including Tiga Investments founder Raymond Zage and former CEO of Tiga Investments Noble Group, Paul Brough.

Toshiba said talks with potential investors would begin as soon as possible. A company spokesman said that privatization is not the premise of the committee, which will examine all possible strategic options.

The decision to set up the committee, made at a board meeting on Thursday, did not affect newly appointed board chairman Taro Shimada, who has yet to be elected as a board member.

The committee will provide the latest available information on potential offers prior to Toshiba’s annual shareholders’ meeting in June.

Separately, Toshiba said the management team will develop a new business plan to be announced before the AGM. Toshiba considers take-private bids

Adam Bradshaw

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