TOSBF - Toshiba: Say?Nara

2023-03-24 04:56:25 ET

Summary

• Originally founded in 1875, the Japanese giant has been through turbulent times to put it mildly.
• Japan Industrial Partners specializes in investing in turnarounds.
• While nostalgic, all I have to say right now is Say?Nara.

After months of speculation , guesstimates , and news from reliable sources, it appears like the venerable Japanese firm, Toshiba ( OTCPK:TOSBF ) has accepted a buyout offer from a private equity consortium offer as reported here by Seeking Alpha. While it is always sad to see iconic brands taken over, this was a long time coming. As covered in this article, the company has been through a sea of changes and issues. A few of those are listed below for context:

• 2015 -> Accounting Malpractices overstating profit by $2 Billion.
• 2016 to 2017 -> Westinghouse Electric bankruptcy , which almost pushed Toshiba to its own bankruptcy and delisting fears. Toshiba got a much needed cash infusion but along with that came activist shareholders. For a company (and country in general) rooted in traditions, this was a new territory.
• 2018 -> Appointment of new CEO from the outside, another uncharted territory for a company known to thrive on insider succession.
• 2020 -> Further accounting issues.
• 2021 -> Board Chairman ousted and unsolicited buyout offers begin.
• 2022 -> Shareholders reject proposal to split the company into two.

Hence, almost everyone involved will be relieved one way or the other than the buyout saga has come to an end. While many (especially the activist investors from 2017) will likely walk away with the short end of the stick, someone gets their way and it remains to be seen how the new private Toshiba operates.

A few highlights from the deal are as follows:

• First up, with the deal expected for quite some time now, there isn't much of a premium left at this time. The company last had a market value of roughly $14 Billion while the buyout is for $15.3 Billion.
• This is reportedly the third largest transaction of this year globally.
• At the forefront of the deal is Japan Industrial Partners ("JIP"), a company specializing in investing in and turning around companies.
• Fans of Toshiba may breathe a sigh of relief as JIP's history also includes acquiring a controlling stake in another revered Japanese brand, Hitachi Construction.
• With several activist shareholders fighting for supremacy and Toshiba's direction right now, this move will at least streamline the decision making process.
• Toshiba has always been seen as a traditional firm, rooted in its way of doing things. This is likely to change as the private consortium includes at least a few well-known, multi-billion firms like Orix Financial Services and ROHM Electronics Industry Corporation. It will extremely likely that these companies will induce Toshiba with fresher ideas and new ways of doing things better.

Toshiba's business has many great parts as covered in this Seeking Alpha article. The problem, at least in recent times, has been to get these different parts to row together in unison so that 1 + 1 will result in something greater than 2. However, with the company, including Board Chairman in the past, struggling with repeated scandals and aftermaths, it is not a surprise that the company could barely stay afloat over the last decade, making investors wonder if 1 + 1 was even greater than 0 at times.

Conclusion

While this is not yet a case of the company itself or its products going out entirely, it is still a little sad whenever you see an iconic brand fold. I still remember how hot the Toshiba laptops and DVD players were during my graduate studies. However, nostalgia is not an investment reason. Being a fan of Peter Lynch's advices, one that comes to mind in this context is " turnaround companies are battered, depressed, and often can barely drag themselves into bankruptcy & they are no growers. They rarely to turnaround. " I am glad it is not the public investors anymore who are investing in this turnaround story.

Being a "Pink Limited Info" stock, Toshiba was already not a good investment or even trade for most, with its well-known accounting and financial reporting issues. And at this point, there isn't much investors can nor need to do except saying Say?Nara.

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