Toshiba Corp. accepted a buyout offer from a group led by private equity firm Japan Industrial Partners on March 23, bringing it a step closer to going private for the first time since listing in 1949.

The beleaguered conglomerate has been mired in a long-standing feud with overseas activist shareholders, but it now aims to focus on domestic shareholders and smooth out its management operations.

Companies that go public by issuing shares are required to disclose financial information and maintain financial soundness. But they benefit from the ease with which they can raise funds and attract people through having improved name recognition and credibility.

Toshiba said that is no longer the case for it in a statement released on March 23 that explained its decision to accept the 2-trillion-yen ($15.3 billion) takeover.

It said there are “multiple major shareholders who hold different views” and that “repeated changes in top management and major changes in management policies may affect our social credibility.”

Toshiba has faced major scandals involving its management over the past decade, such as the accounting fraud it disclosed in 2015. Then its subsidiary Westinghouse Electric Co., its U.S. nuclear power plant unit, went bankrupt in 2017.

The company was crushed by debt and decided to sell off businesses such as its semiconductor memory division to avoid delisting.

Even that was not enough. Toshiba received about 600 billion yen in investments from 60 overseas investment funds to remain afloat.

Many of the company’s shares ended up being held by overseas fund investors as a result. And battles between multiple activist shareholders and Toshiba’s management began to intensify.

In July 2020, a major shareholder fund submitted its own proposal for the appointment of directors at a regular shareholders’ meeting.

Although the proposal was rejected, the investigation committee established at the request of the funds found that Toshiba’s management had “pressured multiple shareholders in collusion with the economy ministry.”

The revelations were explosive and caused deep turmoil within the company.

A general shareholders’ meeting in 2021 rejected Toshiba’s proposal to reappoint two people, including Osamu Nagayama as board chairman.

In 2022, the management team proposed to split the conglomerate into two listed companies to rebuild it. That too was rejected at the extraordinary general shareholders’ meeting.

At a regular general shareholders' meeting, two activist shareholders were selected as outside board directors and six of the 12 directors had some connection to the activist funds.

One of the outside directors who opposed the appointments resigned immediately after being appointed.

Toshiba then took the unusual step of soliciting proposals from investors in April 2022 for a “rebuilding plan, including delisting.”

If JIP acquires all the shares in the takeover bid, it would likely stabilize the turmoil.

Amid uncertainties about the global economy due to Russia’s invasion of Ukraine and instability in the financial environment, Toshiba’s stock price, which had been elevated from speculation about the takeover since last year, has now fallen to the 4,200-yen range.

The overseas funds also did not want to miss the opportunity to sell their shares.

KEEPING A STEADY HAND

Initially, 10 companies showed interest in Toshiba’s business reconstruction plan, but Toshiba later selected four bidders.

In autumn 2022, Toshiba granted priority negotiation rights to the domestic investment fund JIP.

JIP had initially planned to form a consortium with Japan Investment Corp., which is mostly backed by the government, to acquire Toshiba. But JIP later switched tracks to a solo acquisition.

According to sources, JIP’s proposal included “maintaining the current structure” of the company.

This means Toshiba’s core business will not be sold, retaining as much of its current design as possible. It also means the management team, including President Taro Shimada, will not be shuffled.

(This article was written by Ayumi Sugiyama, Kenji Izawa and Shimpei Doi.)