Activist state

Japanese state fund eyes takeover of Toshiba as bid deadline nears

A $30 billion fund backed by the Japanese government is considering a takeover of Toshiba, entering a bidding battle that has attracted interest from the world’s biggest private equity funds.

The interest from Japan Investment Corporation is believed to be the first from a state-backed fund and comes as the conglomerate nears the May 30 deadline for the first round of bidding.

Two people familiar with the talks said JIC was unlikely to launch a Toshiba takeover on its own and needed to partner with one of the foreign private equity funds.

The American groups Bain Capital, KKR and Blackstone are among the other potential buyers.

The deal to privatize Toshiba is expected to be Japan’s biggest ever private equity buyout and has generated strong interest, but those involved in the talks warn of a drawn-out process.

Bidders will also have to form a consortium acceptable to the Japanese authorities since Toshiba’s activities span sensitive sectors, including nuclear, defense and semiconductors.

Few details have been revealed on how the bidders will structure and finance the deal. Government officials say potential buyers will also have to come up with a viable plan to turn around a company that has spent much of the past few years battling with activist investors as it faces a financial crisis.

JIC declined to comment on the potential offer, which was first reported by Bloomberg. Toshiba said it had received confidentiality agreements from several potential partners but declined to release names.

On Wednesday, Toshiba shares rose 3.3% following the report, giving the company a market valuation of $19.5 billion.

The group is expected to inform its shareholders of the number of non-binding proposals it has received in the coming days and explain the structure of the proposed agreements before the annual general meeting of shareholders in June.

JIC was founded in 2018 with the aim of promoting private sector investment and enhancing the industrial competitiveness of Japanese companies. It provides funds to businesses in which the private sector is reluctant to invest without public participation.

Around 96% of JIC is government-owned, but it is also backed by large corporations such as Toyota and Sony. In the fiscal year ending March 2021, JIC pledged to invest a total of 334.3 billion yen ($2.6 billion) in six funds.

Toshiba has suffered from several scandals and management missteps since 2015, when it was questioned about fraudulent accounting. The fight for the future of the 146-year-old conglomerate has pitted its traditional Japanese management against some of the world’s biggest activist funds. It is closely watched as a test of the country’s corporate governance standards.

The bankers advising Toshiba in the process are Nomura, JPMorgan and Mizuho.