Orix weighs cutting contribution to JIP’s Toshiba offer, sources say

ONE of the biggest members of the Japan Industrial Partners-led group pursuing a takeover of Toshiba intends to reduce its financial contribution, according to people familiar with the matter, adding another potential hurdle to the buyout of one of the country’s most iconic companies.

Orix is seeking to acquire 200 billion yen (S$2 billion) of common and preferred Toshiba stock, down from the original 300 billion yen, the people said. Other co-investors with smaller stakes are also requesting to cut the size of their respective portions, the people said.

The financial services firm’s move could revive concerns about funding issues for the preferred bidder group’s multi-billion US dollar offer to take control of the Japanese conglomerate. Orix and chipmaker Rohm, which also planned to invest 300 billion yen, are the largest stakeholders in the JIP-led consortium, the people said.

JIP secured about 1 trillion yen of financing from around 20 potential co-investors including Suzuki Motor and Iwatani, Bloomberg News has reported.

Another potential hurdle for the JIP-led group lies in the Japanese banks putting up the loan for the bid. While the lenders agreed to issue commitment letters for a 1.4 trillion yen loan, one of the requirements for releasing the funds is setting up a special purpose company for the deal. Co-investors in the consortium haven’t signed legally binding agreements with JIP, however, which means the special purpose company cannot be set up yet, the people said.

Deliberations are ongoing and details of the co-investors’ contributions could still change, they said. A representative for JIP declined to comment, while a representative for Orix said the company is looking into investing in Toshiba, while no final decision has been made.

Toshiba last week cut its full-year profit forecast and said its chief operating officer resigned after an investigation into his expenses, a pair of setbacks as the troubled electronics giant tries to extract favourable terms in privatisation talks.

The conglomerate has lurched from scandal to fiasco since at least 2015, when it had to pay the country’s largest penalty ever for falsifying financial statements. It then suffered an ill-fated foray into the nuclear business that forced it to take a US$6.3 billion writedown and sell off its crown jewel memory-chip business, Kioxia Holdings. BLOOMBERG