Toshiba gets $5.9 bil­lion seal to sell med­i­cal unit to Canon

The Pak Banker - - 6BUSINESS -

Canon Inc. agreed to buy Toshiba Corp.'s med­i­cal equip­ment unit for 665.5 bil­lion yen ($5.9 bil­lion) as the world's big­gest maker of cam­eras seeks new growth. 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.

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