Toshiba Bets on Nuclear Power

TOKYO/LONDON -- Japan's Toshiba has agreed to buy Westinghouse, the U.S. power plant arm of British Nuclear Fuels, for $5.4 billion, three times what the target company initially hoped it would fetch.

Toshiba said in a statement on Monday that it expected to have several minority investors in Westinghouse but that it would retain a controlling stake of over 51 percent. The deal is expected to be completed in around six months.

Toshiba was selected last month as the preferred bidder for Westinghouse, a top supplier of nuclear plant technology and a leader in the Chinese nuclear power market, following multiple rounds of bidding over the past several months.

Nuclear power was out of favor after the Chernobyl disaster in 1986 and has been dogged by concerns about the financial and environmental cost of dealing with radioactive waste. But it has recently returned to the fore.

Concern over the security of power supplies and growing demand worldwide for energy has fueled a surge in crude oil prices, prompting fuel-hungry countries such as China to expand investment in other energy sources, including nuclear power.

A source told Reuters last month that Toshiba had outbid its rivals, which included General Electric of the United States and Japan's Mitsubishi Heavy Industries.

Initial expectations were for Westinghouse to fetch about $1.8 billion, although a source familiar with the situation said last month that the price would be around $5 billion.

The deal is expected to expand significantly the Japanese conglomerate's potential customer base. Toshiba offers boiling water reactors, or BWRs, while Westinghouse specializes in the more widely used pressurized water reactors, or PWRs.

"PWR represents about 60 percent of the global market, while BWR accounts for less than 30 percent," said Tomoko Murakami, a researcher at the Institute of Energy Economics, Japan.

"Moreover, in China and the United States, where active construction of new reactors can be expected, PWR is set to remain the dominant technology."

But the acquisition may strain Toshiba's financial standing and cause the company, the world's fourth-largest chip maker and third-largest notebook computer maker, to spread its resources too thin, analysts said.

Shares in Toshiba closed down 0.5 percent on Monday, underperforming the Tokyo stock market's electrical machinery index, which slid 0.28 percent.