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Utility Giant Tokyo Electric Mulls Joining Toshiba Bid

(Bloomberg) -- Japan’s top utility company Tokyo Electric Power Co. is mulling joining a partnership between state-backed investment fund Japan Investment Corp. and a local private equity firm in bidding to take over Toshiba Corp., according to people familiar with the matter.

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The largest power utility in Japan, known as Tepco, is looking to secure Toshiba’s nuclear business through a joint takeover offer, the people said. Foreign funds have also approached JIC to join the bid, according to people familiar with the matter.

JIC and Japan Industrial Partners Inc. are partnering up because they don’t have enough funds on their own, they said. While foreign funds have approached JIC for potential joint offers, it’s too early to tell who JIC-JIP group will partner with or whether they will proceed with their own bid, the people said.

JIC and JIP declined to comment. Tepco spokesman said it wasn’t among companies that have submitted proposals to Toshiba, without elaborating on the potential JIC and JIP partnership. Toshiba spokeswoman Midori Hara declined to provide details of proposals and potential partners for the company. The company said last month it received eight offers to buy out the conglomerate and two proposals for capital and business alliances.

Tepco’s net income plummeted by 97% from a year earlier to about 5.6 billion yen ($41 million) for the financial year ended March 31. Its shares fell as much as 9.5% on Wednesday in their biggest decline since Sept. 30. The stock was still up about 105% this year. Toshiba shares dropped as much as 1.8% on Wednesday.

Profit Taking

“There’s a positive and a negative side to the report, but given how Tepco shares have been surging, investors are taking it as an opportunity to take profit,” said Shoichi Arisawa, an analyst at Iwai Cosmo Securities Co. “It depends on how much money Tepco is willing to put in. This company doesn’t have much money to begin with. Investors could be seeing it as the company getting involved in unnecessary matter.”

Bain Capital, CVC Capital Partners and JIC are among potential bidders for Toshiba, Bloomberg News has reported. Foreign investors have been watching developments at Toshiba to gauge shareholder influence and regulators’ acceptance of foreign private equity firms in Japan.

Any sale of Toshiba, which owns key nuclear technologies, would require approval from the Japanese government. Toshiba is categorized as a company of interest to national security under the Foreign Exchange and Foreign Trade Act for is nuclear expertise.

Toshiba is deeply involved in the effort to clean up Tepco’s wrecked Fukushima Dai-Ichi nuclear power plant, developing technology to remove debris and treat radioactive water. The nuclear power plant suffered from a meltdown back in 2011 amid the destructive earthquake and tsunamis on March 11.

(Adds analyst comment in sixth paragraph.)

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