Toshiba Plans $5b Bid for Areva Unit, PE Firms Circle

TOKYO (Reuters) – Japan’s Toshiba Corp (6502.T) plans to bid for French nuclear group Areva’s (CEPFi.PA) power distribution and transmission equipment unit, four sources with direct knowledge of the situation said, in a deal that could cost it more than $5 billion.

Toshiba, which runs a far-flung electronics conglomerate, is focusing on its power generation equipment business, including nuclear power, for growth as it reins in investment in its chip operations.

Toshiba shares fell 2.3 percent after news broke of the planned bid. French engineering groups Alstom (ALSO.PA) and Schneider Electric (SCHN.PA) are planning a joint bid, while Axa Private Equity is looking at whether to make an offer.

The sources, who declined to be identified because the bid has not been made public, said Toshiba planned to participate in the first round of bidding on Sept. 18.

One source said the deal could be worth more than 500 billion yen ($5.4 billion), while another said the unit could fetch as much as 700 billion yen.

“Local players dominate the transmission and distribution market in Europe, and Toshiba’s presence is limited,” Deutsche Securities analyst Takeo Miyamoto said.

“It is good that Toshiba is considering the opportunity, and if it manages to buy it for the right price, it would be a positive development.”

Toshiba, which remains heavily in debt from its $5 billion acquisition of U.S. nuclear firm Westinghouse in 2006, hopes to become a one-stop full-service nuclear power business, spanning uranium procurement in Kazakhstan to plant maintenance.

Some investors and analysts expressed concern about the health of Toshiba’s balance sheet, which had just been shored up by a $5 billion capital boost in May.

“Toshiba needs to carry out aggressive restructuring before tackling M&As,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. “So far there’s no clear sign that Toshiba is cutting off unnecessary operations.”

Toshiba, which is also the world’s No.2 maker of NAND-type flash memory chips, is still reeling from a prolonged slump in the semiconductor sector, and now seeks to shift its focus to stable and long-term growth through its power business.

Toshiba President Norio Sasaki, who took the helm in June and had led the firm’s acquisition of Westinghouse, has said that profit from its power and infrastructure business will be double the level of profit from its devices in three years.

French Economy Minister Christine Lagarde said this week she hoped that Areva, a state-controlled nuclear reactor maker, would reach a decision on the possible sale of the unit by the end of 2009.

Toshiba spokesman Keisuke Ohmori declined to comment on whether Toshiba was making an offer. But he said: “This deal has the potential to affect the power balance in the sector, and we are watching how it unfolds with interest.”

The unit is No.3 in its field after ABB (ABBN.VX) and Siemens (SIEGn.DE). A spokesman for Areva declined to comment.

Toshiba shares fell 2.3 percent to 466 yen, underperforming a 0.3 percent fall in the benchmark Nikkei average .N225. ($1=92.56 Yen)

By Reiji Murai and Taiga Uranaka

(Additional reporting by Kiyoshi Takenaka and Nobuhiro Kubo in Tokyo, Gilles Guillaume in Paris; Writing by Mayumi Negishi, Editing by Edwina Gibbs and Chris Gallagher)