Toshiba makes historic decision: Delisting in Japan after 74 years in a groundbreaking $14 billion deal

Toshiba announced on Thursday the successful completion of a $14 billion tender offer from Japan Industrial Partners (JIP), a private equity firm. This deal marks a significant milestone for the struggling industrial conglomerate as it paves the way for its transition into a private company. The consortium led by JIP received tendered shares amounting to 78.65% of Toshiba, effectively securing a majority of over two-thirds, enabling them to buy out the remaining shareholders.

The acquisition places the long-standing electronics-to-power stations manufacturer, which has been embroiled in disputes with international activist investors, under domestic ownership. Toshiba is expected to be delisted as soon as December.

According to Travis Lundy, an analyst at Quiddity Advisors and contributor to Smartkarma, "Both activist shareholders and Toshiba were entwined in a prolonged relationship. This takeover grants both parties the opportunity to disengage from their intertwined situation."

Toshiba accepted a buyout offer in March, which valued the industrial conglomerate at 2 trillion yen ($13.5 billion). Despite some shareholders expressing dissatisfaction with the price, Toshiba maintained that there was no potential for a higher offer or competing bid.

On Thursday, June 1, 2023, a securities firm in Tokyo, Japan, showcased an electronic stock board revealing the Nikkei 225 Stock Average figure. The unprecedented demand from foreign investors for Japanese stocks reached its peak on Wednesday. This surge in interest prompted position adjustments ahead of the MSCI equity index rebalancing. The photograph capturing this moment was taken by Kiyoshi Ota for Bloomberg/Getty Images.

Toshiba's Chief Executive, Taro Shimada, expressed his gratitude towards their shareholders for their understanding of the company's position in a statement on Thursday. Warren Buffett has increased his investments in Japan's stock market.

Toshiba expressed its intentions to embark on a new path with a fresh shareholder, signaling a significant move towards a transformed future, according to company officials. The presence of diverse stakeholders, including dissenting shareholders, has posed challenges and hindered smooth business operations for Toshiba. Establishing a stable and supportive base of shareholders will enable the company to effectively execute its long-term plan focused on lucrative digital services.

JIP intends to retain CEO Shimada, with the belief that aligning management and new ownership will enhance morale. Nevertheless, for this strategy to be successful, it is crucial for management to effectively communicate a more compelling narrative to potential investors, as stated by Lundy.

JIP, while not widely recognized abroad, has actively participated in corporate carve outs and spin-offs from Japanese conglomerates. This includes ventures with Olympuss camera business and Sony Groups laptop computer business.

People pass an electronic board showing the closing numbers on the Tokyo Stock Exchange along a street in Tokyo on May 22, 2023.

Kazuhiro Nogi/AFP/Getty Images

Japan's stock market, which has endured hardships for a considerable period, is now experiencing a resurgence that appears to be sustainable.

Toshiba, starting from 2015, has faced a string of challenges such as accounting scandals, substantial financial losses, and the imminent risk of being removed from the stock exchange. Additionally, the company has found itself embroiled in a series of corporate governance controversies.

The JIPs consortium comprises 20 Japanese companies, with chipmaker Rohm, financial services firm Orix, and Chubu Electric Power leading the group. This deal is set to become Japan's biggest M&A transaction of the year. Based on LSEG data, Japan is the sole major market in Asia that has witnessed mergers and acquisitions growth year to date.

Deals involving private equity have been particularly active, including a planned $6.4 billion buyout of materials maker JSR by a government-backed fund.