Following news of a possible acquisition for $19 billion, Toshiba stock prices rose

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Last Updated on October 13, 2022 by Bitfinsider

On Thursday, shares of Toshiba Corporation went up on news that a domestic investor-led group was considering making a bid of $19 billion for the company. This is a potential deal that, if it went through, would likely result in foreign activist shareholders being bought out after years of tension.

According to the Kyodo news agency and other media outlets, the preferred bidder status was awarded to a consortium that is led by private equity firm Japan Industrial Partners and also includes Chubu Electric Power Co. in the second round of bidding.

The estimate of 2.8 trillion yen provided by Kyodo represents a premium of 26% over the price at which trading ended on Wednesday.

In afternoon trading, the stock price had increased by 7%, putting it on track to post its largest one-day gain in more than a year. They have increased by approximately 17% so far this year.

Controversies involving the company’s accounting practices and governance have resulted in Toshiba’s decline as a once-revered conglomerate. In recent years, the company’s management and its many activist shareholders have been at odds, which has cast a cloud over the company’s attempts to turn itself around.

According to Kyodo, the consortium will put up approximately 1 trillion yen in equity, and the rest of the money will likely come from bank loans. Kyodo added that financing talks were ongoing, and the offer value could change depending on future movements in the price of Toshiba’s stock.

It was not immediately clear how many bids Toshiba is seriously considering, but an analyst from Quiddity Advisors who publishes on the Smartkarma platform stated that the competition to take over the company is likely still an open race between Japan Industrial Partners and the state-backed Japan Investment Corp.

According to some sources, the two companies collaborated in the past to submit a bid for Toshiba but have since parted ways and are no longer working together. According to reports in the local media, Japan Investment Corp. has since entered into discussions with private equity firm Bain Capital. Bain Capital is one of several overseas funds that made it through the first round of bidding.

The activist shareholders of Toshiba have been at odds with the company’s management over the direction the company should take, and a number of large international funds have been encouraging the conglomerate to consider private equity bids.

Tensions came to a head last year when an investigation that was commissioned by shareholders found evidence that management had conspired with Japan’s trade ministry, which views the company’s nuclear and defense technology as a strategic asset, to prevent overseas investors from gaining influence at the company’s 2020 shareholder meeting.

Lundy stated that the only way to get rid of the activists was to buy them out and that this was the only option available.

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