Toshiba shares rise as conglomerate opens door to landmark privatization deal

Toshiba shares rose on Friday after the Japanese conglomerate announced it would set up a special committee to evaluate potential offers from private equity and other investors, opening the door to a landmark deal to take the company private. one of the biggest industrial names in the country.

The committee is expected to receive its first proposal from Bain Capital, the US private equity firm that last week won qualified backing for a deal to take over Toshiba’s biggest shareholder, Singapore-based investment fund Effissimo.

People close to the situation said Bain’s preparations for a bid were at an advanced stage, but they also noted the significant political and technical challenges involved in taking the 146-year-old brand private with areas of business range from infrastructure and refrigerators to nuclear power and defence. .

People close to several major private equity funds likely to be involved in talks with Toshiba said that, given the sensitivity of some of its core businesses, any takeover deal hoping to succeed would need a Japanese contingent. important among its investors.

Shares of Tokyo-listed Toshiba jumped nearly 4% on Friday after the committee’s announcement, before falling slightly to trade 1.8% higher.

People close to Toshiba said that although there are deep divisions over the issue within the company, a growing number of senior officials have concluded that a privatization deal could be the best way to resolve years commercial turmoil and deepen the standoff with activist shareholders.

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

The decision by Toshiba’s board kicked off what the company’s most vocal investors hope will be a heated battle between rival investment consortia. A strategic review committee convened last year discussed potential buyout deals with private equity firms including KKR, Blackstone and Brookfield.

Those talks, considered inadequate by some investors, sidestepped the price issue and the committee concluded in November that none of the private equity firms’ suggestions were more attractive than the idea of ​​splitting Toshiba into three companies – a plan that was quickly abandoned. after strong disapproval from shareholders.

The new committee, which Toshiba says will “engage with potential investors and sponsors and consider strategic alternatives,” will be made up of the group’s six existing independent directors, including Tiga Investments founder Raymond Zage and the former Noble Group Executive Chairman Paul Brough.

Toshiba said discussions with potential investors would begin as soon as possible. A company spokesperson said privatization was not the premise of the committee, which will consider all possible strategic options.

The decision to create the committee, which was taken at a board meeting on Thursday, did not involve new chief executive Taro Shimada, who has yet to be elected as a board member. ‘administration.

The committee will provide the most recent information available on the potential offers before Toshiba’s annual meeting of shareholders in June.

Separately, Toshiba said the management team would develop a new business plan which would be announced before the AGM.

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