Monday, July 3, 2017

Toshiba Plan to Raise Cash with Landis+Gyr Q3 IPO

Toshiba Corp. is planning to raise a much-needed cash through a flotation of Landis+Gyr, one of the world’s biggest makers of electricity meters, as the Japanese company struggles to prevent financial downfall.
On Monday, Landis+Gyr said that it plans an initial public offering (IPO) in the third  quarter. The first formal steps towards an initial offering on the Zurich stock exchange is likely to be done next week.

Switzerland-based Landis+Gyr, which develops gear to trace household power consumption, was bought by Toshiba for $2.3 billion in 2011 to bolster its energy-management sales. It is one of several assets Toshiba has put up for sale as it tries to recoup losses at its Westinghouse nuclear energy business, which may result to as much as 1.01 trillion yen, or $9.2 billion, for the year that ended in March.

Toshiba holds 60% of Landis+Gyr, with another 40% owns by Innovation Network Corporation of Japan, a Japanese state-backed investment fund. Dialogues have been made with several potential buyers, which includes the private equity arm of Goldman Sachs and Canada’s Onex Corp, based on the statements of the people involved in the sale.

Last month, the company chose a Japanese-led group as preferred bidders for its prized memory chip business. It aims to raise about $20 billion from the sale of its prized semiconductor business, although the deal faces a legal challenge from Toshiba’s US chip partner Western Digital.

Currently, Toshiba company, scheduled for relegation to the second board of the Tokyo stock exchange, has until the end of March 2018 to prop up its balance sheet or face delisting.

Toshiba said in a stock exchange filing, on Monday, that an IPO is one of several choices on the table and a sale of the business remained an alternative,. It had previously rejected a nearly $2 billion offer from CVC Capital Partners and Hitachi, who made a joint offer to buy Landis+Gyr.

“It’s a dual track process and both options are in play,” said one of the people with knowledge of the IPO process. “But there’s a strong likelihood of them going with an IPO and [Landis+Gyr’s] management are keen [on an IPO].”

Since 1896, Landis+Gyr has been developing electricity meters, and is now at the vanguard of the rising market for digital smart meters, which provide customers with real-time information on how much electricity is being consumed. It was on course to generate $1.6 billion in revenues and a $200 million earnings before interest, tax, depreciation and amortization in its latest fiscal year to the end of March, according to its recent guidance.

Debts stand at less than $200 million. A Zurich-based banker said, “$70bn of stocks has been taken out of the market and investors are looking to redeploy their cash. There is a strong appetite from institutions and private banks for conservatively run, cash-generative companies, with leadership of their markets and resilience through business cycles. Landis+Gyr fits that profile.”

Meanwhile, Toshiba Corp. traded 3.42%, or 9, to JPY 262, by 3:00 PM GMT+9. It opened in JPY 269, with a high session of JPY 270 and a session low of JPY 262; its market capitalization was 1.11 trillion.

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