Toshiba shares jump on report of possible $19 billion stock purchase

TOKYO (Reuters) – Shares in Toshiba Corp (6502.T) It rose on Thursday after a report that a group led by local investors was looking at a $19 billion bid in a deal that could lead to the purchase of foreign activist shareholders after years of jitters.

A source familiar with the matter told Reuters that a consortium led by private equity firm Japan Industrial Partners has secured preferred bidder status in the second round of bidding.

The bid figure of 2.8 trillion yen cited by Kyodo News represents a 26% premium over Wednesday’s closing price.

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Sources said Japan Industrial Partners has approached several Japanese companies.

Among them, Oryx Corp (8591.T) plans to join the consortium, while Chubu Electric Power Co (9502.T) Another source familiar with the matter said it was also considering joining.

Japan’s industrial partners declined to comment.

The fund has participated in the carve-outs of companies and their subsidiaries from Japanese conglomerates. Bought Olympus Corp. (7733.T) Camera business last year and Sony group laptop business in 2014. Read more

Toshiba shares are up 7% in afternoon trading, on track for their biggest one-day gain in more than a year. It’s up about 17% this year.

“People seem to have taken the idea that there will be no more bad news,” said Mitsushiji Akeno, senior fund manager at Ichiyoshi Asset Management.

Toshiba was once a multi-storey conglomerate that has been weakened by accounting and governance scandals. Attempts to change themselves in recent years have been overshadowed by a rift between management and several activist shareholders.

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The consortium will offer about 1 trillion yen in equity, with the remainder likely to come from bank loans, Kyodo said, adding that funding talks are ongoing and the value of the offering may change, depending on future movements of Toshiba’s share price.

Toshiba declined to comment on the report.

It wasn’t immediately clear how many bids Toshiba was seriously considering, but the acquisition competition may still be an open race between Japan Industrial Partners and state-backed Japan Investment Corp., Travis Lundy, an analyst at Quiddity Advisors who posts on the Smartkarma platform, said.

The two sources said the two had previously joined hands to bid for Toshiba, but then went their separate ways.

The first source said the JIC has since been in talks with private equity firm Bain Capital, one of several offshore funds that have passed the first round of bids.

Toshiba and activist shareholders have been at odds over the company’s direction, with several large foreign funds pushing the group to consider private equity offerings.

The tension came to a head last year when a shareholder investigation concluded that management colluded with Japan’s Ministry of Commerce — which views the company’s nuclear and defense technology as a strategic asset — to prevent foreign investors from gaining leverage at the 2020 shareholders’ meeting.

“The only way to get rid of the activists is to buy them,” Lundy said.

(dollar = 146.8300 yen)

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(Reporting by Sam Byford and Takaya Yamaguchi); Additional reporting by Makiko Yamazaki. Editing by David Dolan and Edwina Gibbs

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