Japan’s Toshiba Corp walked away from potential private equity buyout offers at a substantial premium, as well as advanced talks for a minority stake from Canada’s Brookfield Asset Management Inc, three people familiar with the matter said.
Toshiba’s decision to not pursue either course — some details of which have not been previously reported — and instead focus on a plan to split itself in three, has widened the gulf between the conglomerate and a number of its hedge fund investors, said the people, all of whom declined to be identified because of the sensitivity of the issue.
Some investors take issue with Toshiba’s idea that a three-way split would create greater value than a private equity deal, given that the company never formally solicited buyout bids, the people said.
Photo: Reuters
As such, some investors question the transparency of Toshiba’s ongoing strategic review, they said.
At least one private equity firm told the Toshiba committee tasked with its strategic review that a deal to take it private could be done at ￥6,000 a share or more, two people briefed on the review process said.
Another private equity firm told the committee a deal could be done at about ￥5,000 a share, one of the people briefed on the review and another person said.
A price of ￥6,000 would value Toshiba at about ￥2.6 trillion (US$22.97 billion) and represent a 32 percent premium to its average price over the past 200 days, Refinitiv data showed.
It would also be in line with the ￥6,000 range that some major shareholders, including hedge fund Elliott Management Corp, have estimated as fair.
The Toshiba committee last month said that it had asked four private equity firms at what price a potential deal to go private could happen.
The range of prices it received was “not compelling relative to market expectations,” it said in a statement, without specifying the range or elaborating on market expectations.
Multiple sources have said that the firms included KKR & Co and Bain Capital LP.
“We are communicating with shareholders explaining the separation plan we announced on Nov. 12, as well as listening to their opinions,” Toshiba said in a statement. “We will continue our communications with various stakeholders.”
Paul Brough, the outside director who heads the committee, told investors that splitting Toshiba was “the best alternative,” and the committee would not change its mind even if the price levels were made public, a transcript of a Nov. 15 meeting with investors seen by Reuters showed.
Asked by an investor whether shareholders could “have a voice in the process,” Brough said the committee hoped shareholders would agree that the break-up offered greater value.
Reached via a Toshiba spokesperson, Brough confirmed his comments in the transcript, but declined to comment further.
Some shareholders have also taken issue with Toshiba’s decision not to pursue talks with Canada’s Brookfield, one of the private equity firms, on a potential minority investment, several sources said.
That could have seen Brookfield, which successfully turned around the conglomerate’s bankrupt nuclear power business Westinghouse Electric Co LLC, take a minority stake and help overhaul the business, sources said.
Brookfield did not immediately respond to a request for comment.
Toshiba’s review committee has said it held more than 25 meetings with an unnamed “party,” but the suggested transaction was ultimately deemed as “challenging” for shareholders to support.
Toshiba is now conducting interviews with shareholders through investor relations advisory firm Makinson Cowell Ltd to solicit opinions on the break-up, sources said.
A Toshiba source, who declined to be identified, said it appeared that some hedge fund investors would not ever be won over to the break-up plan.
“Certain shareholders would never be satisfied unless we agree to be taken private,” the Toshiba source said.
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