Toshiba-Japan Industrial Partners: Back to basics

In September, Toshiba’s $13.5 billion buyout by Japan Industrial Partners took effect, bringing the company back under state control after a period of turmoil where it was being pulled in all directions by its various international shareholders.

Posted mardi, décembre 5 2023
Toshiba-Japan Industrial Partners: Back to basics

On December 20th, Toshiba will delist from the Tokyo Stock Exchange, bringing the curtain down on seven decades as a public company.  It will be a day of mixed emotions for CEO Taro Shimada and his board of directors.

Toshiba has long been synonymous with Japanese economic might, especially in the 1980s when it was a prominent member of the all-conquering Japanese consumer-electronics industry alongside Sony, Hitatchi and Panasonic. However, bedeviled by financial and governance scandals and the failure of its US nuclear business, Toshiba’s fortunes flagged over the past decade, forcing the 148-year-old conglomerate into the arms of foreign investors, many of the activist variety.  

Boardroom battles
Going private will free the firm from its interminable wrangling with overseas investors, and enable it to focus on boosting its bottom line. Sales by the firm, Japan’s biggest manufacturer of semiconductors, fell steadily from the ¥7.6 trillion high-water mark in 2007, to less than half of that at the time of this year’s takeover.

Since 2017, the company’s largest shareholder had been Effissimo Capital Management, a Singapore-based fund run by Japanese managers that was often at loggerheads with Toshiba’s management, even going so far as to launch an independent investigation into boardroom activities that led to a number of oustings and resignations.

The last straw came in 2022, when Toshiba’s plan to split the company into an energy and infrastructure operation, a electronic devices manufacturer, and a flash-memory chips business, was rejected by shareholders, compelling Toshiba executives to look for ways to buy them out.

Bedeviled by financial and governance scandals and the failure of its US nuclear business, Toshiba’s fortunes flagged over the past decade

Toshiba’s takeover was funded by a consortium backed by two-dozen domestic companies and financial institutions, including the Suzuki Motor Corporation, Chubu Electric Power and chipmaker Rohm.

Getting the activist-shareholder monkey off its back did not come cheaply for Toshiba, which had to buy out Effissimo at twice the share-price the latter paid to buy into the firm in the mid-2010s.

Strategic shift
Confirming the buyout in September, Toshiba’s top executive stated that having a “stable shareholder structure” would help his company focus on long-term strategy centred on high-margin digital services and quantum technology. “Specifically, we intend to further develop each business by better responding to the needs of Toshiba’s customers, implementing growth strategies by developing new technologies,” stated Shimada.   

Despite its newfound freedom, the board has its work cut to right the Toshiba ship. Last month, in its last earning’s announcement prior to delisting, it posted a net loss of $344 million for the six months to September.

Analysts believe that the soon-to-be privatized Tokyo-based conglomerate is set to undergo a rapid and extensive restructuring in 2024, with a number of non-essential business units likely to be sold off. Should all go to plan, and once investor confidence has been sufficiently restored, Japan Industrial Partners plans to relist Toshiba before 2030.