Toshiba Grants Priority Negotiation Rights to JIP, a Consortium of Japanese Giants United to Prevent Overseas Sale

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Japanese electronics company Toshiba is exploring management restructuring including delisting, and on the 11th, Nihon Keizai Shimbun reported that it has granted exclusive negotiation rights to Japan Industrial Partners (JIP), a Japanese investment fund formed by major Japanese corporations.

According to the report, Toshiba received detailed letters of intent including legally binding terms from multiple candidates who participated in the second bidding on the 30th of last month, and decided to enter exclusive negotiations with JIP. JIP had requested Japanese companies to participate in funding last month to form a consortium centered on Japanese firms.

Following JIP's request, Chubu Electric Power, a Japanese electric utility company, decided to invest less than 100 billion yen (approximately 990 billion KRW), and comprehensive financial group ORIX is also reportedly considering an investment of around 100 billion yen. Nihon Keizai Shimbun also reported that JR Tokai, Toray, and Nippon Life Insurance may also participate. Since Toshiba operates in infrastructure businesses such as energy and power, companies with high relevance are showing willingness to participate.

Toshiba is expected to negotiate with JIP based on issues such as stock acquisition price, methods of raising purchase funds, and regulations related to foreign exchange and international trade laws. The negotiation period is expected to be about one month.

The market's focus is on the price and securing funds. Toshiba's market capitalization is around 2.2 trillion yen. Current acquisition candidates are reportedly planning to acquire the major shareholder's stake and then conduct a tender offer for the remaining shares to delist the company. It is estimated that mid-2 trillion yen funds will be needed for delisting. Nihon Keizai Shimbun stated, "It is important whether funds can be raised through Japanese companies' investments and whether financial institutions can provide commitments for the remaining loans."

This decision came amid Toshiba's public sale process. Toshiba experienced great turmoil and disputes after so-called 'activist investors' held more than 25% of shares, and to resolve this, the company pushed for a split last year but failed to gain shareholder support in March, ultimately proceeding with a public sale process.

In Toshiba's acquisition battle, 10 candidates participated in the preliminary bidding. Subsequently, in July, Toshiba's board selected four qualified acquisition candidates: JIP, which formed a consortium with Japan's sovereign wealth fund Japan Investment Corporation (JIC), US Bain Capital, UK CVC Capital Partners, and Canadian infrastructure specialist fund Brookfield.

Although Toshiba decided to enter exclusive negotiations with JIP, there remains a possibility that negotiations may not be concluded. JIC, which partnered with JIP in the first bidding, reportedly expressed willingness to bid individually in the second bidding, believing that industry restructuring is necessary after Toshiba's delisting. JIC is also considering an alliance with US Bain Capital, and Toshiba appears to be requesting detailed proposals from JIC, keeping in mind that negotiations with JIP may not be finalized, Nihon Keizai Shimbun added.