Nishimura and TMI Associates acted on Japan Industrial Partners acquisition in Toshiba

Nishimura and TMI Associates acted on Japan Industrial Partners acquisition in Toshiba

TMI Associates, a Japanese law firm, guided a consortium headed by private equity firm Japan Industrial Partners in its acquisition of Toshiba for JPY2 trillion (equivalent to US$15.2 billion) as part of a take-private agreement. TMI Associates acted as the primary legal advisor, enlisting the assistance of Davis Polk & Wardwell to handle North and South American aspects, while Slaughter & May dealt with Europe, the Middle East, and Africa issues.

Tokyo-based partner Hiroshi Uchima and his team at Nishimura & Asahi provided legal advice to Toshiba, whereas Nagashima Ohno & Tsunematsu and Morrison & Foerster supported Toshiba's board and its special counsel.

According to Masakazu Iwakura, the partner at TMI Associates who headed the deal team, certain activist investors who hold significant stakes in Toshiba dispatched their representatives to the company's board meetings. Consequently, the team had to engage in negotiations over the buyout agreement with not just the company's executives, such as the president and deputy presidents, but also with the activist investors, added Iwakura.

Iwakura noted that due to Toshiba's enormity, the due diligence review was extensive and followed meticulous procedures, which made the negotiation quite intricate and time-consuming.

“Furthermore, as Toshiba deals with and owns so-called sensitive or very important technologies, such as nuclear-related and quantum computer-related technologies, it was quite critical to make thorough checks on foreign jurisdictions’ FDI control regime (i.e., national security regulations) in the relevant countries, with more than 50 jurisdictions, in addition to the merger control regulations,” Iwakura said.

In March, Toshiba's board gave the green light to the tender offer, which was a significant step in the company's efforts to revamp its operations. The board hopes that having a single owner will enhance decision-making at the firm. Toshiba has faced several challenges since it received a buyout proposal from private equity firm CVC Capital Partners in April 2021.

After reviewing the proposal, the 12-member board of Toshiba accepted the offer presented by Japan Industrial Partners, determining that it would increase the company's corporate value.

The consortium will now move forward with regulatory reviews, including antitrust evaluations in countries such as the US, UK, and Germany. Upon completion of the acquisition, Japan Industrial Partners, 17 Japanese companies, six domestic financial institutions, and foreign investors will hold stakes in the entity.

According to Iwakura, Toshiba's loss in its investment in the US nuclear engineering group, Westinghouse Electric Company, has set a precedent for Japanese companies to be more cautious about reviewing the due diligence of foreign targets and their quality.

In 2006, Toshiba acquired Westinghouse Electric Company for over US $5 billion, which eventually went bankrupt in 2017. Toshiba then sold Westinghouse to Canadian asset manager Brookfield in a deal worth US $4.6 billion.

As per Iwakura, Toshiba acknowledged that it had relied too heavily on its advisers during the due diligence process without proper oversight. Consequently, Japanese companies have become more aware of the importance of their main counsel taking control of the review process and conducting a thorough analysis of both the process and results, he added.