The situation of economic tension that had been going through Toshiba since 2015, it seems that it has just exploded and has led the Japanese technology company to accept a significant economic offer that will end one of the most problematic chapters of its 140-year history.
The private equity firm Japan Industrial Partners (JIP) has put on the table an investment of about 2 trillion yen, that is, $15.3 million. Said offer has a premium of 9.6% over the market closing price last Thursday, which represents a hopeful and optimistic solution for the company.
Before making the purchase of Toshiba by JIP, a rather laborious process has been developed. The special committee made up of external directors, the 12-member board of directors (including internal directors) thoroughly studied the proposal. The causes have been none other than to increase corporate value from Toshiba and shareholder return.
In order for JIP to be able to buy Toshiba, it has specified the investments of up to twenty Japanese companies, including Rohm Co, Chubu Electric Power and Orix Group, as well as loans from different Japanese banks. According to data provided by Refinitv, it will be the third largest transaction worldwide so far this year.
The proposed purchase of Toshiba by JIP is the result of an extensive process, since the conglomerate had obtained preferential trading rights through the process of tender for the takeover bid previously manifested in November 2022.
However, it has not been until he has obtained the loan commitment of the financial institutions when it has presented a final proposal in February 2023. And it is that the banks have become more distrustful of the situation of economic instability that affects the planet, and especially, the IT sector.
The next step
With the acquisition of Toshiba formalized and disclosed, JIP must now carry out the application process, which involves global competition laws. Once the purchase is approved, and it is supervised that it complies with the principles of legitimate competition in the market, JIP will buy shares of existing shareholders through its public offering and take Toshiba private. In this way, it will be easier to make decisions in the short-medium term.
The history of purchase offers
The financial crisis that began to plague Toshiba began in 2015 as a result of accounting irregularities and subsidiaries of the US nuclear power plant, generating significant economic losses. At first it generated a writedown of 6,300 million dollars and was forced to sell its memory chip unit and offer shares to foreign investors.
To avoid his insolvency, he agreed in 2017 increase your capital at approximately 600 billion yen. Many shareholders arrived who began to prioritize their interests over the company’s management strategy.
Toshiba’s restructuring process began after the company received its first takeover bid in spring 2021, although it never took place. By then, CVC Capital Partners, based in Europe, made a major offer. A few months later, in November, Toshiba agreed to split the group into three companies as a move to boost its economic and social value growth.
In February 2022 that plan was reviewed and Toshiba finally agreed split the company in twoThe idea was presented at an extraordinary shareholders’ meeting held in March. However, and once again, the majority of the shareholders rejected the plan and the only possible solution was privatization that would lead to the restructuring of the company.
Now the question arises what will become of the future of Toshiba, in the hands of the JIP conglomerate, how it will channel its activity and what economic projection it will have. What is clear is that it has managed to overcome one of the most critical stages in its history.
