Toshiba wins Westinghouse bid for $5 bln: report
Monday January 23, 12:24 am ET
By Kiyoshi Takenaka and Yuko Inoue
TOKYO (Reuters) - Toshiba Corp. (Tokyo:6502.T - News) has won a bid for Westinghouse, the U.S. power plant arm of British Nuclear Fuels, for almost $5 billion, the Financial Times reported on Monday, a move that will expand its overseas operations but has raised concerns about the cost of the deal.
British Nuclear Fuels Chief Executive Mike Parker and Chairman Gordon Campbell decided to sell Westinghouse to Toshiba late on Saturday night, the FT said. Other suitors for Westinghouse included General Electric Co. (NYSE:GE - News) of the United States and Japan's Mitsubishi Heavy Industries Ltd. (Tokyo:7011.T - News).
Neither government-owned British Nuclear Fuels nor Toshiba would confirm the report.
"No final bid has been selected yet," said a spokesman for British Nuclear Fuels. "That process will take place at a board meeting this week. Until that happens, that is the position of the company."
Takeo Miyamoto, an analyst at CLSA Asia-Pacific Markets, said the possible deal would be a step in the right direction for Toshiba, although he had yet to look at whether the reported price was in an appropriate range.
"Traditionally, the Japanese nuclear power business has depended heavily on the domestic market, which is barely growing. Seeking expansion into China and other overseas markets should be a sound strategy," Miyamoto said.
"Nuclear power generation is said to be vital to support power demand in such fast-growing countries as India and China. The deal would help heighten Toshiba's chance to win contracts in those nations."
The Financial Times, quoting a source close to British Nuclear Fuels, said not only was Toshiba's bid of nearly $5 billion the highest offer but it was also seen as the best for Westinghouse's future growth prospects and its workers.
The price was much higher than levels quoted in previous news reports. The Wall Street Journal said on Friday that the eventual sale price for Westinghouse, based in Pittsburgh and a top supplier of nuclear plant technologies, could top $3.5 billion.
"An acquisition of Westinghouse would benefit Toshiba ... but the reported $5 billion price tag was a surprise," an analyst at a Japanese brokerage said.
"Toshiba is burdened with heavy capital investment programs for microchips and thin TV panels. I bet they wouldn't be able to pay that on their own," he said.
The reported price is more than 10 times as big as Toshiba's group net profit estimate for the year ending March 31.
As Japan's second-largest electronics conglomerate, Toshiba offers a wide range of products from nuclear reactors to hot-selling NAND-type flash memory chips, and is planning to launch new flat-panel TVs using advanced panels called surface conduction electron emitter displays (SEDs) this year.
Shares in Toshiba were down 2.9 percent at 750 yen in afternoon trade. The electrical machinery index (-IELECT - News) was down 2.32 percent.
Japanese firms retrenched after an asset bubble popped in the early 1990s, but as the economy shows signs of recovery they are once again expanding cautiously abroad.
Acquisitions of foreign assets by Japanese firms rose 16.4 percent year-on-year in 2005, the highest on record since 1990, according to research by investment bank Nomura.
(Additional reporting by Alison Tudor)
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