Updated December 19th, 2023 at 17:01 IST

Japan Industrial Partners spearheading $14 billion Toshiba turnaround

JIP is led by a former banker with a reputation for being hands-on with their acquisitions.

Reported by: Business Desk
Last month, Tata Motors agreed to sell a 9% stake in Tata Technologies to a US private equity firm TPG's fund, valuing the company at nearly $2 billion. | Image:Pexels

Private equity firm Japan Industrial Partners is spearheading a $14 billion takeover of electronics company Toshiba, eventually delisting the troubled conglomerate on Wednesday.

About third-fourth of a century or 74 years after Toshiba was first listed  on the Tokyo exchange, local player JIP has stepped in to salvage the situation and turn the business around, after carving out businesses from big manufacturers, such as Sony's laptop arm and Olympus' camera unit. 

JIP is led by a former banker with a Wharton MBA and has a reputation for being hands-on with their acquisitions. 

The firm is also known for their humility and frugality, since their executives fly economy.

But Toshiba is far bigger and more complex than any of the businesses JIP acquired before. Toshiba employs about 106,000 people in businesses including batteries, chips, nuclear power and defence, which makes them critical to national security.

The stakes are also higher, Toshiba is a household name in Asian neighbours like India and has scale.

After a decade of controversy in the legacy operations company, bankruptcy of their US unit Westinghouse, management upheaval and backlash from shareholders, the company is expecting a turnaround under JIP.

JIP has not commented on plans to retain current Toshiba CEO Taro Shimada, but will likely re-list the conglomerate’s shares within a few years, as per local media reports quoting the conglomerate's outgoing chairman.

Industry insiders see a split-up and sweeping sales, not a public listing or IPO as the most feasible way forward.

"An IPO would be difficult without a compelling growth story that involves global expansion," according to Damian Thong, head of Japan research at Macquarie Capital Securities.

JIP has worked with US private equity firms KKR and Bain Capital previously. This time around, the Japanese firm will take the lead and take cognisance of about 24 companies and banks investing alongside it, such as chipmaker Rohm, financial services firm Orix and utility Chubu Electric Power.

"They have a very nice track record of not killing companies and enriching themselves in the process, but rather of creating value in these deals," said Ulrike Schaede, a professor of Japanese business at the University of California, San Diego.

Sources cited in reports have said the firm had to iron out disagreements with banks and investment partners over post-buyout restructuring plans, also delaying JIP’s stepping in.

The equity portion of the deal also took time to be finalised, with several bankers blaming what they said was JIP's difficulty in handling discussions within the consortium.

JIP was founded in 2002 with investment from Mizuho Financial Group and Bain & Co among others. Their CEO Hidemi Moue previously worked at a Mizuho predecessor, the Industrial Bank of Japan.

"Normally I am someone who works quietly in the background, so I'm not used to speaking at these things," Moue said in a presentation at a 2017 conference in Tokyo.

JIP works closely with management to turn the businesses it carves out into independent companies, a process that can take a decade in some cases, he told the conference.

JIP is strict on costs, including its own, to avoid driving up fees and burdening the company it is working to turn around, sources cited in reports said.

JIP has invested more than 600 billion yen ($4.2 billion) over 30 deals. It is not certain how much of its own money is invested in the Toshiba deal.

Published December 19th, 2023 at 17:00 IST