The takeover is expected to be completed in about six months. The buyout will be mostly funded through Toshiba’s cash flow, but chief executive and president Atsutoshi Nishida did not rule out the company borrowing for the purpose.
Toshiba expects to get back its investment in 15 to 20 years as its nuclear power business will triple in size in about 10 years. It will pay for the purchase over three years.
Westinghouse is a major player in nuclear power plants and has a large presence in China. Nishida said the deal is hugely significant for Toshiba’s growth. “We are pretty confident that no other company will be able to match the breadth and depth of this combination,” he added.
He said the estimated demand for nuclear power in the world would grow 50 per cent by 2020. He described the deal as an important step for the globalisation of the nuclear power business.
Pittsburg-based Westinghouse has 8,500 employees worldwide and a pretax profit of 18 million pounds in fiscal 2005. Toshiba became the preferred bidder for the company following several rounds of bidding over the past few months. There were 14 companies in the field, which included, besides Toshiba, General Electric Co. and Japan’s Mitsubishi Heavy Industries.
While Toshiba makes boiling water reactors, Westinghouse specialises in the more widely used pressurised water reactors. China is planning to build more than 25 nuclear power plants by 2020 and its preference is for pressurised water reactors.
Analysts, however, seemed to be not impressed with Toshiba’s show. They said the acquisition is likely to strain the Japanese company’s financial health, which may ultimately affect its standing as a leading chipmaker of the world and the third largest notebook computer manufacturer. The price the company has agreed to pay, they say, is almost three times the amount estimated in July.
British government-owned British Nuclear Fuels had bought Westinghouse in 1999 for $1.1 billion. It has been selling its power-generating assets in order to focus on its task of decommissioning and cleaning up nuclear power plants in Britain, most of them built in the 1970s and whose useful life has already ended.