Toshiba grants Canon ex­clu­sive rights for med­i­cal unit bid

The Pak Banker - - COMPANIES/BOSS -

TOKYO: 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."

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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