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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (45962)	2/7/2006 12:30:35 AM
From: mishedlo	Respond to of 116555

Toshiba to buy Westinghouse U.S. power plant unit of British Nuclear Fuels goes for $5.4 billion, three times more than initially expected. February 6, 2006: 7:14 AM EST TOKYO (Reuters) - Japan's Toshiba Corp. has agreed to buy Westinghouse, the U.S. power plant arm of British Nuclear Fuels, for $5.4 billion, three times what the target company initially hoped it would fetch. Toshiba said in a statement on Monday that it expected to have several minority investors in Westinghouse but that it would retain a controlling stake of over 51 percent. The deal is expected to be completed in around six months. Toshiba was selected last month as the preferred bidder for Westinghouse, a top supplier of nuclear plant technology which is also a leader in the Chinese nuclear power market, following multiple rounds of bidding over the past several months. Nuclear power went out of favor after the Chernobyl disaster in 1986 and has been dogged by concerns about the financial and environmental cost of dealing with radioactive waste. But concern over the security of power supplies and growing demand worldwide for energy has fueled a surge in crude oil prices, prompting fuel-hungry countries such as China to expand investment in other energy sources including nuclear power. A source told Reuters last month that Toshiba had outbid its rivals, which included General Electric Co. (Research) of the United States and Japan's Mitsubishi Heavy Industries Ltd.. Initial expectations were for Westinghouse to fetch about $1.8 billion, although a source familiar with the situation told Reuters last month the price would be around $5 billion. The deal is expected to significantly expand the Japanese conglomerate's potential customer base. Toshiba offers boiling water reactors (BWRs), while Westinghouse specializes in the more widely used pressurized water reactors (PWRs). "PWR represents about 60 percent of the global market, while BWR accounts for less than 30 percent," said Tomoko Murakami, a senior researcher at the Institute of Energy Economics, Japan. "Moreover in China and the United States, where active construction of new reactors can be expected, PWR is set to remain the dominant technology." Financing concern But the acquisition may strain Toshiba's financial standing and cause the company, the world's fourth-largest chipmaker and third-largest notebook computer maker, to spread its resources too thin, analysts said. Responding to those concerns, a Toshiba executive said last week that Toshiba could easily cover its part of the acquisition with cash flow. He said Toshiba usually generates ¥300 billion ($2.5 billion) worth of free cash flow in a three-year period. But the comment failed to allay market concerns entirely. "Its cash flow is in good condition this business year, but it will be tough in the next business year even without the Westinghouse deal because capital spending on semiconductors will increase," JP Morgan senior analyst Yoshiharu Izumi said. As Japan's second-biggest 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 this year. State-owned British Nuclear Fuels, which runs the Sellafield nuclear fuel reprocessing plant in northwest England, said in July it wanted to sell Pittsburgh-based Westinghouse. Shares in Toshiba fell 0.5 percent Monday to ¥744, underperforming the Tokyo stock market's electrical machinery index, which slid 0.28 percent.