by Mayu Sakoda, Makiko Yamazaki and Takaya Yamaguchi
TOKYO, Nov 6 (Reuters) – A disagreement over whether Toshiba’s management will stay on after a possible takeover has caused friction between two of the potential buyers and is now fueling bank concerns, sources say, complicating an already uncertain.
Japan Industrial Partners (JIP), which had obtained the status of preferred buyer for the second round of tenders, initially joined forces with the public fund Japan Investment Corp (JIC) during a first round of auctions at the beginning of the year.
However, the two sides parted ways for the second round. Differences over JIP’s plan to retain Toshiba CEO Taro Shimada and his team have been a source of friction between the two buyers, according to two sources familiar with the discussions.
JIP’s plan has since sparked concern among some major Japanese banks, whose funds would be key to financing a takeover of the $15 billion business, the two say. sources familiar with the negotiations and one other person.
Some of those interested in Toshiba worry that the current management is hampering the kind of sweeping reorganization needed to put the company on the road to recovery, three of the sources said.
All sources declined to be identified as the information is confidential.
A JIP representative was not immediately available for comment. Toshiba and state-backed JIC declined to comment.
The outcome of the deal could have huge implications for Toshiba’s 116,000 employees and for national security, given that the conglomerate, which makes nuclear chips and equipment, also produces equipment for the defense industry.
Once a giant of Japanese manufacturing, Toshiba has weathered crisis after crisis since an accounting scandal in 2015. The group has been weakened by years of discord between management and major shareholders, including many foreign activists who are said to be eager to a redemption.
Although a preferred buyer, JIP has struggled to secure enough capital commitments from potential partners, sources say. Japan Industrial Partners may also fail to meet Monday’s deadline to submit a binding offer including commitment letters from banks, sources said.
The investment fund, which has already taken over the camera businesses of Olympus Corp and laptops of Sony, will continue to try to secure financing commitments after the deadline, according to two of these sources. .
JIP has invited a number of domestic companies, including financial services company Orix and power company Chubu Electric Power to join its consortium.
Toshiba’s chief executive told the Wall Street Journal in June that he wants any buyer to keep the conglomerate in one piece because he wants to promote innovation at the 147-year-old company.
State-backed Japan Investment Corp, which is in talks with US private equity fund Bain Capital and North Asian fund MBK Partners to form a separate consortium, is also preparing to make an offer, but there is little likely to submit a binding proposal by Monday, according to two of the sources.
The Japanese government owns 96% of JIC. The Department of Commerce said the fund could not spend taxpayers’ money on a deal just to privatize a company and make it easier to run. Any investment should meet political objectives such as promoting restructuring, he said.
JIC hopes to further assess Toshiba’s business, including the impact of collapsing global demand for semiconductors on the value of Toshiba’s 40.6% stake in flash-memory chipmaker Kioxia Holdings, a said one of the sources.
At the end of October, JIC increased the size of its investment fund from 200 billion yen to 900 billion yen (6.16 billion euros). According to two of the sources, this expansion was not only intended for a takeover of Toshiba but also aimed at other operations. (Report Mayu Sakoda, Makiko Yamazaki and Takaya Yamaguchi; French version Kate Entringer)