Toshiba: $14B buyout offer led by Japanese businesses is go


Publicly owned Japanese conglomerate Toshiba, which makes disk drives and has a stake in Kioxia, is attempting to take itself private via a $14 billion ( ¥2 trillion) buyout scheme.

The scheme is led by Japan Industrial Partners (JIP), and funded by Japanese banks and businesses. It values Toshiba at $32/share (¥4,620) [PDF] – unchanged from the March offer – and will start its tender offer from August 8, until Sep 20 2023.  At least two-thirds of its shareholders must tender their stock for the bid to succeed.

JIP was established in November 2002 in Japan to function as a Japanese-style private equity investment business in the corporate reorganization and restructuring of Japanese companies. 

The buyout offer was recommended by Toshiba’s board chairperson, Akihiro Watanabe, who said in an earnings call  reporting the company’s Q1 results today: “It is a day that marks Toshiba’s exit from an eight-year tunnel.“

The tunnel part is a reference to problems like the mega-company’s accounting scandal of 2015 and the 2017 bankruptcy of its US-based Westinghouse nuclear power station construction business after tremendous losses. Toshiba bought Westinghouse for $5 billion in 2006. Japan’s nuclear power stations ceased being an attractive market after the Fukushima plant meltdown in Tokyo in 2011. That killed Toshiba’s nuclear power station business, but the Japanese market is now changing, as global warming enhances nuclear power’s profile due to its environmental credentials.

As a loss mitigation measure, Toshiba sold off part of its NAND memory business, with its Western Digital joint-venture for NAND manufacturing, in 2017, to a Bain-led consortium for $18 billion. This was rebranded as Kioxia, and Toshiba still owns 40 percent of it. There are ongoing merger discussions between Western Digital and Kioxia and a merger could be announced later this month.

Toshiba endured years of board and senior management turmoil as turnaround plans were rejected, and options such as a a CVC-led private equity bid, and three-way and two-way splits were examined and also rejected. There was also a governance scandal. The JIP buyout offer keeps Toshiba’s ownership in Japanese hands, and would pave the way to a private restructuring of the business to return it to profitability.

Its disk drive business has a 17.5 percent share of the worldwide HDD business behind leader Seagate’s 44.5 percent and Western Digital’s 38 percent. If the buyout offer succeeds then it is possible the HDD business unit would be sold.

Toshiba’s results for its first fiscal 2024 quarter, ended June 30, were 5 percent down Y/Y at $5 billion (¥704.1 billion) in sales, with a loss of $176 million (¥25.4 billion). Part of Toshiba’s latest loss was due to depressed results from Kioxia as it experiences a recession and NAND over-supply, like all the other NAND suppliers. Long term market prospects for NAND are excellent as more and more data needs to be stored and accessed quickly, faster than disk drive data access.

It makes a wide variety of products from air conditioners, home appliances such as TVs and microwaves, to semiconductors.