Canon appears to be the winner of the bidding war for Toshiba Medical Systems. Japanese industrial conglomerate Toshiba said Wednesday that it has awarded Canon exclusive negotiation rights to buy its profitable medical division.
Toshiba aims to wrap up a final acquisition agreement by March 18, when the period of exclusive negotiation rights will end. According to multiple published reports, Toshiba selected Canon over other bids from Fujifilm Holdings, the parent company of Fujifilm Medical Systems, and Konica Minolta, which was working with European private equity firm Permira.
Initially, global buyout firm KKR and Japanese trading house Mitsui were interested, but later withdrew due to the anticipated high price tag. Toshiba had apparently told suitors they needed to offer at least $6.2 billion for the medical business, according to a report on Bloomberg News.
For Canon, the deal would dramatically expand its presence in the radiology market beyond its current niche in digital radiography, giving the firm access to Toshiba's product lines in CT, MRI, ultrasound, and x-ray. Canon currently offers a portfolio of flat-panel digital radiography (DR) detectors, as well as fixed and portable DR, radiography/fluoroscopy (R/F), and DR retrofit systems.
Toshiba has been seeking to divest its medical business to raise cash following a $1.3 billion accounting scandal in which the company had overstated its 2009 earnings. Although it had initially hoped to sell 51% of the healthcare division, it ultimately elected to offer the entire unit.
Toshiba has been hemorrhaging cash lately; in February, Toshiba revised its forecast to say that it now expected a net loss of 710 billion yen ($6.3 billion) in fiscal 2015 (end-March), down from a previous estimate of 550 billion yen ($4.9 billion).
Toshiba Medical Systems had been a significant contributor in revenue and earnings over the years for Toshiba, however. In December, Toshiba said that Toshiba Medical Systems was forecasted to have fiscal 2015 net sales of 440 billion yen ($3.64 billion), up 7% from the 412.5 billion yen ($3.4 billion) in net sales in 2014. The firm expected to have 2015 operating income of 15 billion yen ($123.9 million), down from 23.9 billion yen ($197.4 million) last year.
