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Toshiba Board Approves $15.2 Billion Takeover Offer From Japan Industrial Partners

Toshiba Board Approves $15.2 Billion Takeover Offer From Japan Industrial Partners
The business said on Thursday that the board of Toshiba Corp. has accepted a $15.2 billion takeover offer from a group led by private equity firm Japan Industrial Partners, potentially putting an end to years of turmoil at the conglomerate.
After much conflict with foreign activist shareholders, a successful purchase would see the scandal-plagued company taken private and securely in local hands, valued at 4,620 yen per share or 2 trillion yen overall.
But it's still unclear whether activist funds, who are said to own about 25% of the corporation, will be happy with the terms. Just a 9.7% premium over Thursday's closing price of 4,213 yen would be provided by the offer price.
Because the offer price is not high enough to warrant recommendations, Toshiba stated in a filing that the board will not advise shareholders to submit their shares. According to the document, the price was reduced a few times from an initial offer of up to 5,500 yen per share.
Before the JIP group launches the tender offer in late July, it was also said that the board's support might alter.
The JIP bid, however, is "the only full proposal" that has been made during a year-long competitive auction process and would allow stockholders to sell their shares, according to Toshiba.
According to sources, 20 Japanese corporations, including Chubu Electric Power, Orix Corp., a financial services company, and Rohm Co., a chip manufacturer, want to participate in the agreement. According to Refinitiv data, it would be the third-largest M&A deal worldwide thus far this year.
"This ends months of uncertainty regarding whether a deal was coming and years of uncertainty regarding Board understanding of the right price," said analyst Travis Lundy of Quiddity Advisors, who publishes on Smartkarma.
"This would provide a lot of activists a way out, even if it is not what they hoped for. The question is whether 'Toshiba Fatigue' is strong enough to overcome disappointment on price."
Since 2015, Toshiba, a large conglomerate that also owns 40.6% of the memory chip manufacturer Kioxia Holdings, has been hit hard by accounting scandals and significant losses. The company even came dangerously close to being delisted before becoming embroiled in a string of corporate governance scandals.
When the company was at its lowest point, an investigation commissioned by shareholders found Toshiba had conspired with the Japanese trade ministry, which views the company's nuclear and defense technology as a strategic asset, to prevent foreign investors from participating in the 2020 shareholder meeting.
The strategic review and the buyout proposal were ultimately brought about by the aftermath from that disaster.
Almost a year ago, Toshiba began an auction procedure that resulted in eight initial buyout approaches and two capital alliance offers.
According to sources, four bidders—including the private equity companies Bain Capital, CVC Capital Partners, and Brookfield Asset Management—moved on to the second round.
JIP initially collaborated with the government-backed Japan Investment Corp (JIC), but the two organizations ultimately opted to part ways over conflicts regarding management retention and restructuring strategies.
Last month, the JIP consortium filed a legally binding takeover offer supported by $10.6 billion in loan pledges from significant banks.
It has taken weeks for the board to move forward with a vote on JIP's bid because, according to reports, several board members were not happy with its offer price.
Over the past year, Toshiba stock has dropped by 12%, underperforming the Nikkei 225 average's dip of 2.2%.

Christopher J. Mitchell

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