The preferred bidder to take over Toshiba Corp (6502.T) has offered to pay less than the generally regarded threshold of 6,000 yen a share, two sources said, suggesting the premium for the Japanese conglomerate may not be as substantial as investors had expected.
A consortium headed by private equity firm Japan Industrial Partners (JIP) was awarded preferred bidder status by Toshiba in a second round of bidding on Oct. 7, though the conglomerate is still open to proposals from others, people with knowledge of the matter have said.
Conditions of Japan Industrial Partners’ proposal include keeping current management, a different source said – a friendly offer for Toshiba Chief Executive Taro Shimada who plans to increase profit by improving data-related services.
Japan Industrial Partners, which has been asking Japanese firms including Chubu Electric Power Co Inc (9502.T) and Orix Corp (8591.T) to join the consortium, has been given a month to submit a detailed proposal including financing, one of the sources said.
JIP’s initial offer was lower than 6,000 yen per share, the two sources told Reuters, placing the value of a probable tender offer at below 2.6 trillion yen ($17.5 billion). Shares of Toshiba closed at 5,435 yen on Monday. They have climbed 15% in 2022 on expectations for a buyout.
The offer price may be altered as a consortium led by state-backed Japan Investment Corp (JIC) is developing a competing bid, said the sources, who refused to be named because the matter is private.
JIC, JIP, and Toshiba refused to comment.
Japan Industrial Partners joined forces with JIC to bid for Toshiba in the first bidding round but later split due to a dispute about post-buyout strategies, people with knowledge of the matter have said. JIC has been holding talks with Bain Capital, one of several overseas funds that qualified in the first round of bidding, along with MBK Partners, the sources said.
Investors have regarded 6,000 yen as a key threshold. During a strategic review in 2021, at least one global private equity firm told Toshiba’s review committee that a deal to buy out the conglomerate could be done at 6,000 yen a share or more.
But the environment for leveraged buyouts has since become different with global monetary tightening. Chip industry share prices have plunged globally owing to fear of falling semiconductor demand, possibly hurting the value of Toshiba’s 40.6% stake in flash memory chip maker Kioxia Holdings Corp.
In Japan, the court-guided rehabilitation of auto parts supplier Marelli Holdings Co Ltd – owned by U.S. private equity firm KKR & Co Inc (KKR.N) – has gotten banks worried about terms for financing leveraged buyouts, private equity sources said.
Still, with its ultra-easy policy, Japan has a quite stable investment environment in comparison with the United States, they said. Japan has seen some sizeable buyouts in recent months despite market headwinds this year, including Bain Capital’s $3.1 billion deal for Olympus Corp’s (7733.T) microscope unit.
($1 = 148.7500 yen)
