Daily Times

MUMBAI, June 9 (Reuters Breakingviews) – A Japanese corporate titan is showing others how to constructively engage pushy owners. Two-and-a-half months after Toshiba (6502.T) first tentatively supported a $14 billion buyout offer from a consortium led by Japan Industrial Partners, the scandal-ridden elevators-to-power-systems conglomerate officially recommended the deal to shareholders, taking into account investor feedback and effectively concluding no better offer is likely to materialise. It’s a fair assessment.

The stock has gradually risen to within 2% of the offer price despite the book value of its shares in Kioxia, the chipmaker of which it owns about 40%, falling since the end of March amid a semiconductor supply glut. Its limited visibility on the value of the memory-chip specialist was one reason it cited for its earlier restraint. Moreover, JIP’s offer was the only specific and feasible one with full financing at the end of a year-long competitive process. A weak global leveraged buyout market and rising rates make it compelling.

Toshiba has published long and detailed disclosures about the takeover process. And in an abundance of caution after earlier aggressively fighting foreign owners including Paul Singer’s Elliott Management, Daniel Loeb’s Third Point and Farallon Capital, Toshiba leaves open the option of revising its opinion when JIP’s tender offer finally launches some time from July.

The price may be less than two times what those funds paid when they bailed out the company in 2017. Activism is rising in Japan, though, and the big shift in Toshiba’s approach has been to stop treating shareholders like an enemy – a lesson articulated on Thursday by Jerry Black, chair of the company’s special committee looking at strategic options. It underscores limited appetite in the country to maintain a sub-optimal status quo. Pushy investors can only hope that pivot catches on for future campaigns.

CONTEXT NEWS

Toshiba said on June 8 that its board has decided to recommend shareholders accept a tender offer from a group led by Japan Industrial Partners. It paves the way for a 2 trillion yen ($14.3 billion) buyout to take the conglomerate private. The tender offer is expected to be launched some time from late July.

The board in late March gave its tentative support to the offer. It said the premium was reasonable compared to other take-privates by third parties, but added the offer did not reach a level that could be clearly recommended. Among other factors, it cited limited visibility into the value of chipmaker Kioxia, of which Toshiba owns around 40%.

In recommending the offer, Toshiba noted the book value of Kioxia’s shares had fallen since its March announcement.