Toshiba shares jump on report of possible $19 bln buyout

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TOKYO — Shares in Toshiba Corp surged on Thursday following a report that a domestic investor-led group was looking at a $19 billion bid in a deal that could lead to foreign activist shareholders being bought out after years of tension.

A consortium led by private equity firm Japan Industrial Partners has been given preferred bidder status in the second round of bidding, a source familiar with the matter told Reuters.

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The bid figure of 2.8 trillion yen cited by the Kyodo news agency represents a premium of 26% to Wednesday’s closing price.

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Japan Industrial Partners has contacted multiple Japanese firms, sources have said.

Of these, Orix Corp plans to join the consortium, while Chubu Electric Power Co is also considering joining, said another source familiar with the matter.

Japan Industrial Partners declined to comment.

The fund has been involved in corporate carve-outs and spin-offs from Japanese conglomerates. It bought Olympus Corp’s camera business last year and Sony Group’s laptop computer business in 2014.

Toshiba shares were up 7% in afternoon trade, on track for their biggest one-day gain in more than a year. They have risen about 17% this year.

“It looks like people bought into the idea that there won’t be more bad news,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.

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Once a storied conglomerate, Toshiba has been weakened by accounting and governance scandals. Attempts to turn itself around have been overshadowed in recent years by discord between management and its many activist shareholders.

The consortium will put up about 1 trillion yen in equity, with the rest likely to come from bank loans, Kyodo said, adding that financing talks were underway and the offer value could change, depending on future movements of Toshiba’s stock price.

Toshiba has declined to comment on the report.

It was not immediately clear how many bids Toshiba was seriously considering but the takeover contest is probably still an open race between Japan Industrial Partners and state-backed Japan Investment Corp, said Travis Lundy, a Quiddity Advisors analyst who publishes on the Smartkarma platform.

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The two had previously joined forces to bid for Toshiba but have since gone their separate ways, sources have said.

Japan Investment Corp has since been in talks with private equity firm Bain Capital, one of several overseas funds that passed the first round of bidding, the first source said.

Toshiba and activist shareholders have been at odds over the direction of the company, with several large foreign funds pushing the conglomerate to consider private equity bids.

Tension peaked last year when a shareholder-commissioned investigation concluded that management had colluded with Japan’s trade ministry – which sees the company’s nuclear and defense technology as a strategic asset – to block overseas investors from gaining influence at its 2020 shareholder meeting.

“The only way to get rid of the activists is to buy them out,” Lundy said. ($1=146.8300 yen) (Reporting by Sam Byford and Takaya Yamaguchi; Additional reporting by Makiko Yamazaki; Editing by David Dolan and Edwina Gibbs)