Toshiba shares rise as conglomerate opens door to landmark take-private deal

Shares of Toshiba rose on Friday after the Japanese conglomerate announced it would set up a special committee to assess potential offers from private equity and other investors, opening the door to a landmark deal to take down one of the country’s biggest industrial names privatize.

The committee is likely to receive its first offer 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.

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

Tokyo-listed Toshiba shares rose nearly 4 percent on Friday after the committee’s announcement, before slipping slightly to trade 1.8 percent higher.

People close to Toshiba said that although there were sharp disagreements within the company on the matter, a growing number of senior figures have concluded that a take-private deal may be the best way to resolve years of business turmoil could and deepening stalemate with activist shareholders.

Toshiba’s announcement, which has a market value of about $17 billion, came late Thursday night and followed a sharp escalation of pressure for such a step from major investors and a letter that the company’s second largest shareholder, 3D Investment Partners, sent to Toshiba’s board of directors on Wednesday.

The decision by Toshiba’s board of directors kickstarted what the company’s staunch investors are hoping will be a pitched battle between competing investment syndicates. A strategic review committee convened last year discussed possible takeover deals with PE firms such as KKR, Blackstone and Brookfield.

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

The new committee, which Toshiba says will “work with potential investors and sponsors and review strategic alternatives,” will be composed of the group’s six existing independent directors, which include Tiga Investments founder Raymond Zage and former Noble chief executive 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 the newly appointed board chairman Taro Shimadawho 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 shares rise as conglomerate opens door to landmark take-private deal Source link Toshiba shares rise as conglomerate opens door to landmark take-private deal

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