Toshiba's Sale of Medical Unit Could Fetch Billions

Posted in Medical Device Business by Chris Newmarker on February 29, 2016

Still reeling from an accounting scandal, the Japanese company feels pressured to sell off one of the few bright spots in the company: its medical division. The sale could be worth billions of dollars.

Qmed Staff

Toshiba MRI
Toshiba's roughly $3.5-billion-a-year medical business makes diagnostic imaging equipment, such as the MRI machine shown above. (Image courtesy of Toshiba Medical Systems)

The medical device industry could be losing one of its giants. Struggling Toshiba, which had planned to sell part or all of its medical equipment business, now plans to simply sell the whole thing, according to Reuters, which cited people familiar with matter.

The Reuters sources thought that aggressive bidding could boost the sales price above the previous estimates equivalent to $3.5 billion. It is a cash infusion the Japanese giant sorely needs.

Prospective buyers include buyout firm KKR & Co., Canon Inc., Fujifilm Holdings Corp., and Konica Minolta Inc., according to Reuters. The deal would mark the latest chapter in the medtech merger frenzy that is shifting the landscape of the medical device industry.

Toshiba first announced in December that it was shopping around its medical device business, which brings in about $3.5 billion a year in sales.

The healthcare business—which makes diagnostic imaging equipment covering everything from MRI to CT, ultrasound and X-rays—is one of the few areas of the company that has been clocking in operating income. Sales are up as the business’ mainstay CT and imaging systems see firm sales in the North American service sector and Chinese equipment sector, according to Toshiba’s most recent quarterly report. Operating income was down, but only because the medical device business has been increasing its investment in R&D.

The overall company, meanwhile, continues to up its projections when it comes to fiscal year losses. Toshiba in early February said it expects a net loss of 710 billion yen (equivalent to $6.3 billion) for the fiscal year ended March 31. It is an increase in losses from the previous projection of 550 billion yen (equivalent to $4.9 billion) made in December.

Toshiba is seeking to claw its way back from an accounting scandal involving nearly $2 billion in overstated profits over the past seven years. The company has been engaging in a massive restructuring. Toshiba previously announced that 10,600 workers—about a fourth of the company’s global workforce—are losing their jobs.

Toshiba’s stock is one of the worst performing among major medical device companies. It is presently trading around 175 yen ($1.55) per share, less than half of the roughly 500 yen ($4.44) per share it was trading for a year ago.

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Chris Newmarker is senior editor of Qmed and MPMN. Follow him on Twitter at @newmarker.