Toshiba shares jump on report of possible $19-B buyout

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

A consortium led by private equity firm Japan Industrial Partners and which also includes Chubu Electric Power Co has been given preferred bidder status in the second round of bidding, Kyodo news agency and other media have reported.

The 2.8 trillion yen figure cited by Kyodo would mark a 26-percent premium to Wednesday’s closing price.

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

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 around 1 trillion yen in equity, with the rest of the money likely to come from bank loans, Kyodo said, adding that financing talks were ongoing 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 is seriously considering but the contest to take over the company is likely 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.

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, local media have reported.

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.

Tensions culminated last year when a shareholder-commissioned investigation concluded management had colluded with Japan’s trade ministry – which sees the company’s nuclear and defence 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)