Toshiba Grants Canon Exclusive Rights for Medical Unit Bid

  • Industrial group selling assets after accounting scandal
  • Medical unit makes diagnostic imaging such as MRI, ultrasound

Toshiba Corp. granted exclusive negotiation rights to Canon Inc. to buy its medical equipment unit as the Japanese industrial giant restructures its operations after an accounting scandal.

The proposal from Canon is superior to others and the exclusive rights will last until March 18 as the companies work toward reaching a final agreement, Tokyo-based Toshiba said in a statement Wednesday. Suitors for the business, Japan’s largest medical equipment company, were told they needed to offer more than 700 billion yen ($6.2 billion), people familiar with the matter have said.

Toshiba, which makes everything from nuclear power equipment to laptop computers, flash memory chips and home appliances, is seeking to revive profits by narrowing the scope of its business lines. An accounting scandal has left the Japanese conglomerate in tatters, facing record losses, job cuts and potential spinoffs.

“Toshiba sells it with strong reluctance, but it has no choice,” said Hiroyasu Nishikawa, an analyst at Iwai Cosmo Securities Co. “Toshiba will lose a driver for sales and profit.”

GE, Siemens

Canon, the world’s biggest camera maker, is targeting a business that makes diagnostic imaging systems such as MRI, X-ray and ultrasound equipment. It would also take the company into competition with General Electric Co., Royal Philips NV and Siemens AG for MRI machines that typically cost more than $100,000 each.

Canon is diversifying as smartphones with increasingly advanced cameras eat into its business. The Tokyo-based company also makes printers, fax machines and projectors while its existing health care business includes radiography and ophthalmic equipment, according to its website.

Canon had 634 billion yen of cash and equivalents as of Dec. 31 with total debt of 1.6 billion yen, according to data compiled by Bloomberg.

Toshiba’s health care division, which includes medical equipment and other businesses that Toshiba doesn’t plan to sell, had sales of 409.5 billion yen in the 12 months ended March 2015 and operating income of 23.9 billion yen, according to data compiled by Bloomberg.

“Medical equipment is a growing segment and is one of the few attractive businesses Toshiba has left today,” Mark C. Newman, managing director and senior analyst at Sanford C. Bernstein in Hong Kong, said before the announcement. “But following their accounting scandal they desperately need to raise money to strengthen their balance sheet.”

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