Forced sellers tend not to be too picky, as Toshiba Corp.'s mooted sale of the electronic-metering company it owns with Innovation Network Corp. of Japan shows.
But there are at least two reasons why a $2 billion jettisoning of Landis+Gyr to CVC Capital Partners and Hitachi Ltd. makes sense.
For one, it raises some much-needed money for Toshiba, even if it's just a pittance compared with the $9.2 billion in losses the Tokyo-based firm expects for the year that ended in March. And if INCJ sells, that could smooth the path for Toshiba to offload its flagship $20 billion chip business.
In order to contend with the bankruptcy of its Westinghouse nuclear unit, Toshiba needs all the money it can get. It purchased Landis+Gyr in 2011 for $2.3 billion to boost its energy-management sales, and now owns a 60 percent stake. Offloading that, even at a loss, gets it out of a highly capital-intensive business.
INCJ would be the other beneficiary of any sale. The government-backed group was established in 2009 with 2 trillion yen ($18 billion), ostensibly to promote technologies of the future. However, it's largely acted as a bailout fund for Japan's struggling electronics businesses. Its biggest deal so far, after losing a bidding war with Taiwan's Foxconn Technology Group for Sharp Corp. last year, has been the creation of Japan Display Inc., formed by merging the troubled screen-manufacturing units of Toshiba, Sony Corp. and Hitachi.
According to Nikkei, INCJ is considering partnering with private equity firm KKR & Co. to make a bid for Toshiba's chip unit. Such a pairing would provide a neat solution to Tokyo's worries about the prized asset falling into foreign hands. They include Foxconn, whose ties with China make it an unpalatable option. And Foxconn, which employs about a million workers on the mainland, has a history of renegotiating prices lower.
While it's unlikely a U.S. suitor would have problems from a Japanese national security standpoint, that's not to say the two in the running will have an easy ride.
San Jose, California-based Western Digital Corp. can't afford to bid too high after the acquisition of SanDisk Corp. strained its balance sheet. (Western Digital became Toshiba's manufacturing partner in the flash-memory business when it bought SanDisk for $15.8 billion last year.) And Broadcom Ltd. will have its work cut out after Western Digital raised objections -- singling out Broadcom in particular -- in a letter to Toshiba's board earlier this month.
INCJ could probably find the money if it really needs, considering its government ties. But getting funds from the sale of Zug, Switzerland-based Landis+Gyr would give it instant firepower, and even a blip of good news would brighten Toshiba's day.
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