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Toshiba’s Downtime: Tender-Backed Delistment

Toshiba (OTC: TOSYY) is becoming private on Wednesday (9/20) through a US$14 billion tender offer from Japan Industrial Partners (JIP). The private equity firm cleared its way, sealing Japan’s most significant deal this year and would then be delisted as early as December. The company launched a ¥4,620 (US$31.24) per share bid to take Toshiba private last month, a move that would put the electronics-to-power station maker in domestic hands after years of battles with overseas activist shareholders. Moreover, the offer marks the end of Toshiba’s 74-year history as a listed firm. After years of battles with overseas activist shareholders, the electronics-to-power station’s maker is in domestic hands. Emphasizing the deal, JIP’s officials forecasted that the offer would likely occur – with at least two-thirds of shareholders having tendered their shares. The odds of JIP’s bid succeeding increased last week when it was revealed that Toshiba’s largest shareholder, Effissimo Capital Management, had decided to tender its 9.9% stake. Now that JIP has gained a two-thirds majority, the remaining shareholders would be squeezed out upon a vote at a planned emergency shareholder meeting. Due to this, the total value of deals involving Japanese firms this year through mid-September has increased 25% from the same period last year, buoyed by the Toshiba deal, as well as a planned $6.4 billion buyout of materials maker JSR, according to data compiled by LSEG.

The prominent multinational conglomerate, Toshiba, had been facing a significant downturn starting in 2015. The company encountered adversity commencing with an accounting discrepancy, involving an overstatement of operating profits by roughly US$1.2 billion. This event precipitated the resignation of the CEO, signifying a pivotal juncture for the organization. Subsequently, in 2017, Toshiba reported staggering financial losses amounting to US$3.4 billion. To mitigate this financial crisis, Toshiba initiated strategic measures, including the sale of its memory chip business and a substantial portion of its PC division, aiming for a financial resurgence. Moreover, Toshiba grappled with governance issues and shareholder battles, contributing to its struggles. In response to these challenges, Japan Industrial Partners (JIP), recognized for its expertise in revitalizing struggling companies, stepped in. JIP presented a formidable solution, making a substantial US$14 billion bid to transition Toshiba from a publicly traded entity to a privately owned company. This bid reflects JIP's confidence and strategy to rejuvenate Toshiba's prospects and restore its position in the industry. The proposed privatization under JIP's direction holds the promise of a new beginning for Toshiba, potentially setting the stage for a resurgence and enhanced stability in the coming years. Toshiba executives and lenders have said privatization will allow Toshiba to focus on longer-term strategy.

Toshiba is set to undergo a significant transition as it switches to its new parent company and largest shareholder, TBJH Inc., on Wednesday (9/27), pending shareholder approval expected to be decided in a November meeting. This move marks the end of Toshiba's more than seven-decade history as a publicly listed company on the Tokyo Stock Exchange, with the acquisition priced at ¥4,620. CEO Taro Shimada is optimistic about Toshiba's future under the new parent company, TBJH Inc. He sees this transition as a pivotal step that will propel Toshiba Group forward. Even with privatization on the horizon, Toshiba remains committed to increasing its value and maintaining its competitive edge. Shimada's remarks highlight the company's dedication to navigating this transformation successfully and continually improving its products and services. In a rapidly changing technological landscape, Toshiba aims to innovate and adapt while delivering value to its stakeholders. Notably, Toshiba had previously spun off parts of its operations, including its prized flash-memory business, now known as Kioxia, in which Toshiba maintains a significant stake. However, concerns linger about Toshiba's ability to return to profitability even after delisting. Additionally, it's worth noting that Japan has introduced the concept of "tender-backed delistment," whereby a company can be forcibly delisted if a majority of shareholders tender their shares during a takeover bid. This mechanism has raised questions about corporate governance and shareholder rights in Japan's business landscape.





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