Consortium led by Japan Industrial Partners submits bid to purchase Toshiba for $15bn, but reportedly has no banking approval for full price
The ownership of Toshiba remains undecided this week, after a consortium led by Japan Industrial Partners (JIP) reportedly submitted a 2.2 trillion yen ($15 billion) offer for the Japanese conglomerate.
According to Reuters however, citing the Nikkei newspaper on Monday, the bid remains uncertain because it lacks key commitment letters from banks, raising questions over whether it will succeed.
The $15 billion bid is in line with Toshiba’s market value, and it is reported that the takeover consortium is aiming to pull together financing by the end of this month – if Toshiba accepted the offer.
The consortium bidding for Toshiba is led by private equity group Japan Industrial Partners (JIP), but also reportedly includes ten other investors including utility Chubu Electric Power and financial services group Orix.
JIP, previously selected by Toshiba as the preferred bidder, was widely expected not to deliver a firm proposal with bank commitments in time for a Monday deadline it had received from the company, Reuters reported.
It seems that JIP’s plan to allow Toshiba’s current management to stay on after a buyout had raised alarm among some of Japan’s big banks, whose funding is seen as critical to financing the deal, sources have reportedly indicated.
JIP, Chubu Electric and Orix will each invest 100 billion yen, the Nikkei reported, without saying where it got the information. A number of overseas funds opted not to join the proposal due to expectations for low returns, it added.
A Toshiba representative declined to comment to Reuters, saying the company could not “answer information about candidates, including co-investors, as it may undermine fair process.”
There is a chance that investor focus could now turn to another potential bidder, state-backed fund JIC, which sources have said is also preparing a bid.
The JIC fund has reportedly been in talks with US private equity fund Bain Capital and north Asia fund MBK Partners to form a separate consortium, sources have said.
It should be noted that JIP and state-backed JIC had previously teamed up in a first-round of bidding for Toshiba earlier this year but then they parted ways for the second round.
Toshiba has been seeking a way forward after years of accounting and mismanagement scandals that began seven years ago.
Back in 2015, Toshiba was hit by a major accounting scandal and faced delisting – a crisis that resulted in foreign-based shareholders owning more than half of the company, including activist shareholders such as Elliott Management, Third Point and Farallon.
And such was the crisis that enveloped the conglomerate, it attempted many options to secure its future.
For example Toshiba sold off assets such as medical devices, personal computers, consumer electronics and its US nuclear power unit, Westinghouse Electric, which declared bankruptcy in 2017.
In August 2021 it began talking with a number of private equity firms as it explored its future options.
Then in November last year Toshiba revealed plans to break itself up into three separate companies.
The plan, which Toshiba hoped to complete by March 2024, would result in the creation of one unit focused on infrastructure and another unit focused on electronic devices such as power semiconductors.
But Toshiba’s top shareholder (Effissimo Capital Management), as well as an influential proxy advisory firm (Institutional Shareholder Services), in March 2022 signalled their opposition to the breakup of the veteran Japanese conglomerate.
That investor refusal in March to approve either the breakup or reorganisation proposals presented by Toshiba’s management, left the company without a clear way forward.
In April Toshiba said it would solicit deal offers, including a potential buyout.
And there seems to have been some interest.
In early June Toshiba said it had received eight buyout offers and two offers of capital alliances that would see it remain as a listed entity.
Later in June, Toshiba shareholders approved the addition of two board members from large activist investors, which added momentum to potential buyout plans.
Toshiba has also previously said it would consider the possibility of privatisation, although the company’s chief executive insisted the firm would study all options.