Canon to buy Toshiba's medical equipment business for $5.9 bn

17 Mar 2016

Canon Inc, the Japanese manufacturer of imaging and optical products, has agreed to buy Toshiba Corp's medical equipment unit, Toshiba Medical Systems Corporation (TMSC), for 665.5 billion yen ($5.9 billion), the companies said today.

Tokyo-based Cannon, known more for its cameras and office equipment, said it has concluded a share transfer agreement with Toshiba Corporation for the acquisition TMSC.

Toshiba, which is selling the unit to help fund restructuring after a massive accounting scandal, said the deal would yield a profit of about 590 billion yen in the current fiscal ending this month if it closes in time.

Canon, which also makes X-ray machines and eye examination devices, has been trying for years to expand into high-margin medical devices, particularly as demand for cameras has declined with the advent of smartphones.  (See: Canon close to buying Toshiba's medical equipment unit)

Cannon said it planned to make TMSC a subsidiary. The transaction, however, is conditional upon the clearance of necessary competition by regulatory authorities.

Canon is looking at new growth through a grand strategic transformation as per a five-year initiative launched in 2016 aiming to emerge as an Excellent Global Corporation by Phase V of the 5-year plan.

As part of the strategy, Canon intends to expand its health care business, integrating it within the safety and security sector, as a next-generation pillar of growth.

TMSC is one of the leading global companies in the medical equipment industry, especially in the field of medical X-ray computed tomography (CT) systems, where TMSC is the overwhelming market leader in Japan and has been steadily increasing its global market share.

Additionally, TMSC is the only company in the industry with a broad product portfolio that spans diagnostic X-ray systems, magnetic resonance imaging (MRI) systems, diagnostic ultrasound systems and diagnostic nuclear medicine systems. The company also offers cutting-edge medical imaging solutions and in-vitro diagnostics aimed at individualized care.

Under the agreement announced today, TMSC, will become part of the Canon Group and both companies will maximize their management resources. The merger of TMSC with the Canon Group is expected to make it possible for Canon to leverage TMSC's core strength in imaging diagnostics, further reinforcing TMSC's operational strength in its in-vitro diagnostics business and next-generation medical IT through M&A and other strategic investment, to make possible the strengthening of Canon's biomedical business.

Additionally, by making use of Canon's business portfolio and partnerships, further progress is expected in the field of medical equipment.

A collaborated effort between Canon, with its advanced production technologies, and TMSC, with its exceptional product development capabilities, is expected to lead to further enhancing TMSC's product strength through the provision of precision design and microfabrication technologies, an optimized production system and cooperation aimed at improving quality. This will not only enable the sale of price-competitive products in the market, but also contribute to the development of the health care business through the circulation of funds generated through enhanced management efficiency applied toward investing in the development of next-generation medical equipment.

Canon possesses proprietary high-speed dynamic X-ray imaging sensor technology, among other imaging devices, along with associated elemental technologies; photoacoustic tomography technology selected by Japan's national ImPACT programme; medical robotic system technologies and minimally invasive technologies.

Through the promotion of joint technology development leveraging these Canon technologies and TMSC's R&D capabilities, the Canon Group will be able to globally provide innovative new products and services in the future.

Toshiba chief executive Masashi Muromachi is trying to overhaul the laptops-to-nuclear conglomerate following last year's revelations of overstated profits going back to around 2009. He has announced more than 10,000 job cuts and also plans to sell its loss-making laptops and home appliances businesses.

Funds from the deal will help enable Toshiba to drop plans to seek about $1.8 billion in additional loans from Sumitomo Mitsui Banking Corp, Mizuho Bank and Sumitomo Mitsui Trust Bank, reports quoting sources familiar with the situation said.

However, Toshiba has to overcome the multi-billion dollar accounting scandal related to its Westinghouse nuclear power operations, which the US authorities, including the Justice Department and the Securities Exchange Commission, were investigating.