Embattled Japanese corporation Toshiba is entering a second buyout bidding round in its prolonged struggle to find a way forward from making losses and its share price undervaluing the company. Until this is sorted, Kioxia’s long-term future will be in doubt.
The Toshiba news follows that of its first round of buyout suitors which was revealed in July. It reportedly involved Bain, Japan Industrial Partners, Brookfield Asset Management and CVC Capital Partners. The company has been in a troubled state following an accounting scandal and gigantic losses with its nuclear power station building activities. Activist investor groups have been agitating for strategic changes to transform the company and its management after failed attempts by management to divide the company into two or three separate units.
India Times reports that the same four organizations are included in a second bidding round: Bain Capital, CVC Capital Partners, Brookfield Asset Management and private equity business Japan Industrial Partners, which is in partnership with Chubu Electric Power Co., to carry out due diligence into a Toshiba buyout.
Other potential participants with Japan Industrial Partners include Orix Corporation and Central Japan Railway Co. The Nikkei outlet reported that Japan Industrial Partners had contacted seven other Japanese businesses, ten in all, in order to make an all-Japanese bid. Each participating company, which has business links to Toshiba, would invest up to 100 billion yen ($695 million).
The non-Japanese buyout candidates may think that an all-Japanese bid will not be enough to make the changes they think are necessary for Toshiba to return to financial health. Japanese participants may think that, on the other hand, Japanese honor requires a domestic solution.
A new board took office at Toshiba in June. The chair of this board issued a letter to shareholders on September 15 confirming a buyout was on the table: “The entire board is assessing strategic alternatives, which include privatization as one option.” They see restructuring as the other option, with no buyout.
The statement said “the Board and Management are combining their efforts to create a stronger Toshiba, and to do so, the Board and Management are considering all possible alternatives, free from the influence of any particular stakeholder.”
They want to insure that Toshiba receives “the best proposed strategic alternative from potential investors and sponsors, thereby aiming to maximize Toshiba’s corporate value.”
Toshiba owns 40 percent of NAND chip fabricator and SSD supplier Kioxia, which is in a joint venture to make NAND chips with Western Digital. The future ownership and direction of Kioxia will be a closely watched part of any buyout deal.