Toshiba confirms offer by Japan Industrial Partners

Tokyo — Toshiba has confirmed it had received a proposal from a consortium led by private equity firm Japan Industrial Partners, after sources said the investors had secured $10.6bn in loan commitments for their buyout.

Securing firm commitments from the banks was a major hurdle in the group's efforts to pull together a bid to buy Toshiba and take it private, according to the sources. The offer will now need to go to the conglomerate’s board for approval.

“The company has received a proposal from the JIP consortium,” Toshiba said in a statement. It added that it would assess the proposal, which had just been delivered on Thursday, and “continue to act in the best interests” of shareholders and other stakeholders.

JIP declined to comment.

Two of the sources said major Japanese banks, including Sumitomo Mitsui Financial Group, had issued letters of commitment to provide ¥1.4-trillion ($10.6bn) in loans to the group.

Those loans included a commitment line of ¥200bn for working capital, the sources said, declining to be identified because the information had not been made public.

The final buyout proposal would also include an equity portion of about ¥1-trillion, they said. Whether that amount had been finalised was not clear, however.

The Nikkei business daily reported the total value of the buyout proposal was about ¥2-trillion.

Sources have previously said the equity would be provided by a number of Japanese companies, including financial services group Orix, chipmaker Rohm Co and Japan Post Bank.

Shares of Toshiba fell about 3% in Tokyo trade, potentially reflecting investor calculations that a rival bidder — with a higher offer — might now be less likely to emerge, because the financing had been secured.

“There is serious risk here that this doesn't get done. There are lots of people who could say no,” said analyst Travis Lundy of Quiddity Advisors, who publishes on Smartkarma. But big Toshiba shareholders “might just accept a sup-optimal result because it gets them out”.

Toshiba named the JIP-led group as its preferred bidder in October. JIP was then asked by Toshiba to provide commitment letters from banks by November 7, something it was unable to do.

The loan deal had taken a few months to finalise, causing a delay in the submission of the bid, as JIP, equity partners and the banks had worked to resolve disagreements over post-buyout restructuring plans, the sources said.

The banks asked Toshiba to promise the sale of underperforming businesses if earnings deteriorated after a buyout was concluded, sources, including those who spoke on Thursday, have previously said.

They also requested Toshiba to agree, following the proposed buyout, to set up a committee including investor representatives to monitor management, according to sources who spoke previously. Furthermore, the banks wanted Toshiba to accept bank executives sent to the company.

Some of the demands are still being discussed.

Reuters