Toshiba Thrown a Lifeline as Bid Takes it Private

Toshiba – the Japanese industrial conglomerate and one of only two producers of high speed currency processing systems – has announced that a ¥2 trillion ($14 billion) tender offer from private equity firm Japan Industrial Partners (JIP) has ended in success, paving the way for the company to go private.

The JIP-led consortium saw 78.65% of Toshiba shares tendered, giving the group a majority of more than two-thirds, which would be enough to squeeze out remaining shareholders.

The deal puts the 148-year-old electronics-to-power stations maker in domestic hands after years of battles with overseas activist investors. The company is set to be delisted as early as December.

Compared with a peak of over ¥7.6 trillion recorded for 2007, Toshiba’s sales had shrunk to less than half of that figure, to ¥3.4 trillion, by 2022. Since 2015, Toshiba has been battered by accounting scandals and heavy losses, particularly relating to its Westinghouse subsidiary in the US which built nuclear reactors, and came close to taking the company down.

It had to sell off and withdraw from a number of sectors, such as memory chips, overseas nuclear construction and medical equipment, to keep afloat, and in 2017 the business was restructured into four independent companies, which at the time was intended to make for more agile decision-making and more accountability with tighter financial control.

These four companies cover energy, storage and electronic devices, industrial ICT solutions and infrastructure systems and solutions. The latter is the home of the Security and Automation division, where the company’s portfolio of banknote processing and inspection systems sit (along with facial recognition technologies, robotics, logistics and postal automation, card and IoT security). The division had sales of ¥686.3 billion in 2022 and 19,000 employees.

It is understood that Toshiba is considering reintegrating these four companies as it seeks to streamline operations and speedily restructure after going private.

In a statement, the JIP-led group said that ‘we aim to establish a stable management structure for Toshiba and to implement a new growth strategy quickly’ once the deal is complete.

‘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, and making workplaces more rewarding for executives and employees of Toshiba.’ 

Toshiba first entered the banknote sorter market some 50 years ago with the development of a system for the Bank of Japan. Soon after, it made its first overseas sale, to the Austrian central bank, and now has customers across the world. In 2011 it bought the assets of the Texas-based high speed sorter developer Non Linear Concepts.

Its products include the FS-2000 high speed sorter for central banks, capable of processing 120,000 notes per hour, the more compact FS 810 with a throughput of 45,000 notes per hour, the IBIS 1000 fitness sorter for central bank branches, commercial banks and CIT cash centres and the FS-P70 online shrink packaging machine. It also offers the BI-1200 high speed banknote inspection system.