The acquisition, pending shareholder approval, would take Toshiba private, a move experts say could help stabilize the company, which has been searching for a path forward.
Toshiba Corp.'s board has accepted a $15 billion offer from a private equity firm, a change in ownership that likely will leave its HDD and flash memory businesses unaffected.
The 147-year-old conglomerate's board has accepted a buyout led by Tokyo-based Japan Industrial Partners (JIP), which will take Toshiba private if shareholders agree to the package. Toshiba is the third-largest HDD vendor globally, according to Statista, and owns 40.64% of flash memory drive maker Kioxia.
The acquisition comes after years of struggles for Toshiba, stemming from an accounting scandal in 2015 where it needed to revise several years of profits. Two years later, the company suffered losses from its Westinghouse Electric subsidiary in nuclear power construction, which contributed to a $3.4 billion net loss in 2017.
The buyout may relieve some of these struggles, according to Ray Lucchesi, president of Silverton Consulting. It also may be the start for some significant changes ahead for Toshiba.
The challenge for anything that goes private is to identify what they want to sell off, what they want to keep and how to restructure that organization.
Ray Lucchesi President, Silverton Consulting
"The challenge for anything that goes private is to identify what they want to sell off, what they want to keep and how to restructure that organization," Lucchesi said.
New board members, same Kioxia
JIP's buyout of Toshiba won't affect Kioxia, according to Jim Handy, general director and semiconductor analyst at Objective Analysis. In 2018, Toshiba spun off its flash memory business, calling it Kioxia; Bain Capital Private Equity is now its majority shareholder.
"Toshiba's role in Kioxia, formally, is that of an investor and nothing more," Handy said. JIP's Toshiba would continue its responsibilities as an investor and board member.
Thomas Coughlin, president of analyst firm Coughlin Associates, agreed, adding that the change in Toshiba ownership likely won't affect either storage business.
"Unless the new Toshiba management needs the money from selling their share, I don't think there will be much impact," Coughlin said.
Still, Lucchesi said, there are many factors the private equity owners will have to look at, including selling shares in profitable businesses such as Kioxia if funds are needed elsewhere.
Toshiba is the third-largest global maker of HDDs, making up 20% of the market in 2022, behind Seagate's 43% and WD's 37%, according to Statista.
Being the smallest player and lacking vertical integration presents competitive pressure for Toshiba, according to Edward Burns, an analyst at IDC. The scale required for future investments in the HDD market may prove difficult, but the buyout could be a good thing for the HDD business.
"This is probably the best alternative for preserving Toshiba's HDD future, at least relative to the other possible acquirors," Burns said.
Coughlin said that while the HDDs are seeing a slump in sales, he expects it to improve by the second half of this year, particularly in the data center business.
Handy said JIP will ultimately decide the fate of Toshiba's HDD business. As long as the business continues to make a profit and it continues to make business sense to participate in the HDD market, JIP will likely continue to support it.
"With new ownership, I would expect for them to maintain their market share or to try to sell this business," he said.
Adam Armstrong is a TechTarget Editorial news writer covering file and block storage hardware and private clouds. He previously worked at StorageReview.com.
