Aggressive Bidding Could Drive Toshiba Medical's Price To $5.8B
Toshiba is looking to sell its entire medical device unit, Toshiba Medical Systems Corporation (TMSC), rather than just a majority stake, as had been previously indicated. Insiders told Reuters that an aggressive bidding war currently taking place could substantially increase the value of the business from $3.5 billion to $5.8 billion.
Toshiba is in the midst of a long-term reconstruction strategy called the “Toshiba Revitalization Action Plan,” which includes shedding 10,000 jobs and finding buyers for underperforming assets. The plan was implemented in December, along with projections of record high losses in 2015. According to Bloomberg, Toshiba has widened its annual loss forecast from $4.5 billion to $6 billion.
In a statement released in December, Toshiba announced it would be opening up TMSC to outside majority stakeholders “in order to strengthen the financial ability to further realize our growth strategies.” At the time, Toshiba vehemently denied any specific deals or concrete plans to sell off its medical business completely, but Reuters reported that rising restructuring costs have prompted Toshiba reconsider its plans.
“To get to a healthy balance sheet from this point will take many years of work,” said Damian Thong, an analyst at Macquarie Group in Tokyo, to Bloomberg, adding that completing a medical sale would help increase the company’s liquidity.
In January, FujiFilm was considered the frontrunner among potential bidders, which included Sony, Samsung, Canon, Hitachi, and GE Healthcare. According to Reuters, FujiFilm, Canon, Konica Minolta, and global buyout firm KKR & Co have been shortlisted for the second round of bidding, but none of the potential buyers has commented on impending offers.
Toshiba has expressed interest in selling to a Japanese company to keep the business domestic, and the Wall Street Journal spoke to a Japanese government official, who said “If the buyer is purely a foreign investment fund which could make money from selling the business to outsiders, it may not make much sense for Toshiba and Japanese industry.”
Analysts have previously valued the business at between $3.5 and $4.4 billion, but as the bidding heats up, some insiders told Reuters that the figure could be driven as high as $5.8 billion. Seeking Alpha reports that March 4, 2016 will mark the deadline for the second round of bidding.
TMSC is an industry leader in medical imaging, with a portfolio that features CT scanners, MRI imaging, ultrasound, X-ray, and nuclear medicine. In 2014, Toshiba announced that it would be investing billions in mergers and acquisitions that would bulk up its medical imaging portfolio, and Hisao Tanaka, former CEO of Toshiba, predicted TMSC would be worth nearly $10 billion by 2018, reported the Chicago Tribune.