Japanese regulators unhappy about Canon’s moves to take over Toshiba’s medical system unit

Fujio Mitarai, CEO of Canon.

Japanese regulators gave the green light to Canon’s more than $6 billion purchase of Toshiba’s medical systems unit, but aren’t pleased with the way the camera-maker went about it.

Citing rules that are ambiguous, regulators said this week that Canon potentially violated the law in the deal and that any future transaction could be subject to a criminal complaint, The Wall Street Journal reported.

The medical systems unit is mostly made up of imaging devices, including CT, MRI, X-ray and ultrasound machines, and was one of Toshiba’s more profitable subsidiaries. Toshiba was in dire need of cash ahead of the end of its March 31 fiscal year after it incurred huge losses in the wake of an accounting scandal.

What the regulators took issue with on the deal announced in March and valued at about $6.5 billion was how it was structured. Canon paid the purchase price up front but didn’t immediately get shares in the unit. Instead, it received warrants that would give Canon the shares once regulators approved the deal. In the meantime, the shares were tucked away in a special-purpose company that had just $292 in capital, the newspaper said.

Such a move, regulators said, was a maneuver to bypass the law by effectively making the transaction first and telling regulators later.

“We decided to make an announcement about the warning to let everyone know that it is not acceptable, so the same method won’t be used in the future,” Takeshi Shinagawa, director of the commission’s mergers-and-acquisitions division, told the Journal.

Canon's medical device offerings include radiography devices, mobile X-ray machines, fluoroscopy devices and optical coherence tomography equipment for eye care.

In response to the regulator’s chiding, Canon said it takes the warning seriously, and Toshiba said it didn’t do anything illegal but would strive to improve its compliance.

- check out the WSJ story (sub. req.)

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