Canon In Exclusive Talks To Buy Toshiba Medical
By Jof Enriquez,
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Toshiba Corporation announced recently that Canon Inc. has gained exclusive rights to negotiate the purchase of its medical business as part of a major restructuring plan to renew financial strength.
A heated bidding war over Toshiba Medical Systems Corporation (TMSC) sparked after its parent company put up the unit for sale late last year. Several investment firms and companies led by Fujifilm, Sony, Samsung, Hitachi, and GE Healthcare reportedly submitted bids in an auction in January. The second round of bidding involved Fujifilm Holdings Corp. and Konica Minolta Inc., which submitted a joint bid with European private equity firm Permira, Reuters' sources familiar with the matter said.
Fujifilm was initially reported as the frontrunner to buy TMSC, with Canon following closely behind. Both firms were rumored to be offering close to $6 billion dollars for the business, which manufactures X-ray machines, computed tomography (CT) scanners, and magnetic resonance imaging (MRI) systems, and is one of Toshiba’s few remaining revenue generators, with 405.6 billion yen reported revenue in the past financial year.
However, Canon has now emerged as the likely buyer of TMSC. In a press release dated March 9, the company announced that it has granted exclusive rights to Canon to continue discussions through March 18, 2016, in anticipation of a final agreement.
"Toshiba has carried out a close evaluation of the overall proposals received from companies that expressed an interest in acquiring TMSC, including their appraisal of TMSC's value and the feasibility of successfully completing the transaction, and determined that the proposal from Canon Inc. is superior to that of the other companies," Toshiba announced.
Citing the Nikkei business daily, Reuters said Canon was favored because it offered 700 billion yen ($6.2 billion), and because there was little overlap between the products made by TMSC and those of Canon, which consist primarily of cameras and printers. The Wall Street Journal also reported the same sales figure for TMSC, signifying that Canon is intent on expanding into the medical sector through acquisitions.
"The price tag for Toshiba’s medical unit would be a bit expensive,” Ryosuke Katsura, an analyst at SMBC Nikko Securities, told the WSJ. "It would be roughly 30 times the unit’s operating profit in the year ended March 2015. The business synergy between Toshiba’s medical unit and Canon’s is very limited, given the small presence of Canon in the medical industry."
Toshiba's sale of its medical business will provide a quick infusion of cash to repay outstanding and additional loans to Japanese banks owed by Toshiba to finance a turnaround, according to the WSJ.