The payday of Toshiba shareholders still has one more difficulty: Tokyo

Toshiba reported a 52% increase in operating profit for the year ended March.


kazuhiro nogi / Agence France-Presse / Getty Images

Shareholders operating at


TOSYY 1.71%

may have finally prompted the company to consider selling itself, after years of corporate drama. But they still face one final hurdle: the Japanese government.

The Japanese industrial group on Friday reported a 52% increase in operating profit for the financial year ended March. However, most investors are not focused on its outcome, but instead on the prospect of a potential deal to acquire the company.

After against the demands from its shareholders for many years, Toshiba said last month it will attract buyback offers from potential investors, most likely private equity funds. Toshiba shareholders voted to reject the company’s replacement proposal split it in two March. The company is expected to complete the evaluation of non-binding bids for the company before its annual general meeting in June. Toshiba’s share price is up 15% this year, outperforming the broader Japanese market.

Will have no shortage of suitors. Japanese broadcaster NHK reported on Friday that there were already more than 10 interested funds, including several domestic funds. Bain Capital said in March that it was working on a possible bid. A deal that could be the largest-ever private equity purchase in Japan.

But a deal won’t be simple. Toshiba’s nuclear power and defense businesses pose legitimate national security concerns should they fall into foreign hands. There are potential solutions, such as separating sensitive businesses and introducing domestic, possibly even state-owned, investors. When Toshiba sold its memory chip unit to a consortium led by Bain Capital in 2018, the deal was structured to ensure Japanese investors controlled a majority of the voting rights.

So the challenge for potential buyers will be to come up with a proposition that will satisfy both Toshiba and Tokyo’s activist investors. According to an independent investigation authorized by Toshiba shareholders, Japanese officials collusion with company management to try to influence the 2020 shareholder vote for foreign investors.

Toshiba’s long management saga may finally be over. A happy ending is still ongoing – and probably depends as much on the Japanese government as anything else.

Write letter for Jacky Wong at [email protected]

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