Toshiba deals medical biz to Canon for $5.9B as U.S. authorities launch accounting probe

Toshiba (TYO:6502) said yesterday that it inked a deal to sell its medical device business to Canon (NYSE:CAJ) for $5.9 billion, as the U.S. Justice Dept. and the SEC probed the accounting practices in its U.S. businesses, and today said it plans to lay off an additional 3,000 workers.

Toshiba last week granted Canon exclusive negotiating rights to buy Toshiba Medical after a hotly contested auction. The ¥665.5 billion sale of Toshiba Medical Systems follows the February announcement that Toshiba would sell the entire medical equipment unit rather than just a controlling stake. A bidding war soon developed among a slew of private equity players and rival corporations. Toshiba has also said that it will either shut down or transfer all of its other healthcare businesses by the end of March.

A deal would provide much-needed liquidity for Toshiba, which is facing mounting restructuring costs after a $1.3 billion accounting scandal. Toshiba Medical Systems put up sales of $3.60 billion (¥405.6 billion) during fiscal 2015, which ended in March of that year.

News of the U.S. probe, which sent Toshiba shares tumbling 8%, comes on the heels of the company’s statement this week that it had made 7 additional accounting errors that were previously unknown. The Toshiba Medical deal with Canon generated its own controversy after Toshiba transferred the unit to a special-purpose company ahead of transaction. The unusual move could allow it to book the proceeds of the sale in the current fiscal year, even if scrutiny from anti-competition watchdogs drags on, according to SMBC Nikko Securities analyst Yukihiko Shimada.

Earlier this week Fujifilm Holdings (TSE:4901), which lost out last week to Canon in the race to be picked as preferred bidder for Toshiba Medical Systems, questioned Toshiba on the asset transfer and the timing of the deal.

Today Toshiba said it would take a write-down on its nuclear business and unveiled an extra 3,000 job cuts, taking its planned total to 14,000. Although a stress test of the nuclear business last quarter showed no need for a write-down, Toshiba said its lower credit ratings and its weaker ability to procure funds had prompted a new test.

Toshiba also said it agreed to sell its white goods business, which had revenue of ¥225 billion in the past financial year, to China’s Midea Group. Terms of the deal are still being finalized.

($1=112.14 yen)

Material from Reuters was used in this report.

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