By Kiyoshi Takenaka and Makiko Yamazaki
TOKYO (Reuters) – Toshiba Corp said on Thursday its board has decided to recommend shareholders take up a tender offer from a group led by Japan Industrial Partners, helping pave the way for a $14 billion buyout to take the Japanese conglomerate private.
The tender offer, to be launched in late July, would put the electronics-to-power stations maker in domestic hands after years of battles with overseas activist shareholders that sparked management reshuffles and strategy reversals.
The board in late March accepted the buyout offer valuing the industrial conglomerate at 2 trillion yen ($14.31 billion), but said the 4,620 yen per share offer price was too low to recommend shareholders tender their shares.
The board on Thursday concluded the price was “fair and reasonable,” with no prospects of a higher offer or competing bid, especially amid unfavourable conditions such as the weak leveraged loan market and higher interest rates.
It also said the book value of its 40.6% stake in Kioxia Holdings, which comprises a large portion of Toshiba’s value, has fallen by about 49.5 billion yen since the March announcement as the memory chip maker suffered massive loss.
Toshiba believes the buyout would help build “a stable management base to implement a consistent business strategy to reform and grow the company over the medium to long term,” it said.
“It’s the best of a lot of bad options for pretty much all investors,” said Mio Kato, the founder of LightStream Research. “Toshiba’s real value is significantly above the tender offer price, but getting to that point entails a lot of risk.”
It would be difficult for activist shareholders to exit at a higher price than this, because the issue for them has been how to exit without the share price collapsing, he said.
Since 2015, Toshiba has been battered by accounting scandals, suffered heavy loss and came close to being delisted. It has also been engulfed in a series of corporate governance scandals.
Some 20 Japanese companies, including financial services firm Orix Corp, chipmaker Rohm Co Ltd and Chubu Electric Power Co Inc, plan to take part in the deal led by private equity firm Japan Industrial Partners, sources have said.
($1 = 139.7600 yen)
(Reporting by Kiyoshi Takenaka and Makiko Yamazaki; Additional reporting by Anton Bridge; Editing by Christopher Cushing and Sherry Jacob-Phillips)