Toshiba Gets $5.9 Billion Deal to Sell Medical Unit to Canonby and
Industrial group selling assets after accounting scandal
Medical unit makes diagnostic imaging such as MRI, ultrasound
The deal will be funded by existing cash and borrowings, Tokyo-based Canon said in a statement Thursday. The agreement comes a day after unsuccessful bidder Fujifilm Holdings Corp. questioned Toshiba about the sale.
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.
Canon is buying 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 company also makes printers, fax machines and projectors while its existing health-care business includes radiography and ophthalmic equipment, according to its website.
“There is no reason to believe that the selection process wasn’t fair and that Canon is paying an unfairly low price,” said Damian Thong, an analyst at Macquarie Group Ltd. in Tokyo.
Canon had 654 billion yen of cash and equivalents as of Dec. 31 with total debt of 1.6 billion yen, according to data compiled by Bloomberg.
On Thursday, Fujifilm disclosed that it had asked Toshiba a day earlier to explain how it decided to enter exclusive negotiations with Canon, and also cast doubt Toshiba’s plan to complete the deal by the end of the fiscal year this month, citing the length of time usually needed to clear antitrust scrutiny.
The statement called on Toshiba to respond by 3 p.m. in Tokyo on Thursday. Instead, Toshiba announced that it reached an agreement with Canon.
“We are left with an impression that the deal went through a process that was exceedingly tricky and aimed at buying time,” Takao Aoki, a spokesman for Fujifilm, said after the announcement. “If this is to be accepted, this raises concerns that competition laws are just a facade.”
Toshiba is seeking to raise money as it deals the fallout from the accounting scandal. The Tokyo-based company granted Canon exclusive negotiation rights on March 9, passing over Fujifilm. Another bidding group led by Konica Minolta Inc. was dropped after it offered less than was being sought. Masashi Muromachi, Toshiba’s president, is divesting the medical unit, cutting jobs and considering a reorganization of its personal-computer and TV operations as the company forecast a record loss for the fiscal year.
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 previous fiscal year ending March 2015 and operating income of 23.9 billion yen, according to data compiled by Bloomberg.
But Toshiba’s shares slumped on Thursday on news that it is under investigation by the U.S. over allegations that it hid $1.3 billion in losses at its nuclear power operations. The Justice Department and the Securities and Exchange Commission are looking into whether fraud was committed, according to two people familiar with the matter.
Separately, Toshiba kept up the busy flow of news on Thursday with two other announcements. Toshiba is selling a majority stake in its home-appliance business to China’s Midea Group Co., and also unveiled a plan to invest 360 billion yen on a new factory for flash-memory chips.
The stock declined 8 percent to 192 yen in Tokyo. Canon fell 1.4 percent, while Fujifilm fell less than 1 percent. Toshiba’ agreement with Canon was announced after the market closed.