CVC Capital Partners is weighing a $ 20 billion offer for a majority stake in Toshiba that could make the Japanese industrial group private and remove activist investors from its shareholder register, according to two people with knowledge of the talks.
The deal, which would rank among the 20 largest leveraged acquisitions in history, would mark another twist in a corporate saga that has taken Toshiba from a profit-increasing scandal in 2015 and from the brink of bankruptcy two years later to a humiliating defeat in a showdown with its largest shareholders last month.
CVC is expected to partner with other investment funds to finance the deal, which was first reported by Nikkei Asia. The Luxembourg-based procurement group declined to comment.
In a statement Wednesday, Toshiba said it would carefully study an initial proposal it received from CVC the day before.
The removal of 145-year-old Toshiba from the Tokyo Stock Exchange in a foreign-led deal would be a hugely symbolic move, advisers directly involved with the conglomerate said, after years of increased activism and takeovers by foreign funds. . US private equity firms such as Bain and KKR view Japan as one of the world’s most target-rich markets.
But Toshiba has been especially vulnerable. The company’s protracted financial crisis, which stemmed from the collapse of its nuclear business in the US in 2017, was temporarily resolved when the company hired Goldman Sachs to execute an emergency issuance of $ 5.3 billion of equity.
Though the deal was quickly completed, it left Toshiba’s shareholder register teeming with funds from foreign activists – groups who may see the opportunity for a lucrative exit if the CVC deal is completed at a significant premium.
Activist investors in Toshiba include Singapore-based secret fund Effissimo, which is the group’s largest shareholder and has led the pressure on Nobuaki Kurumatani, the chief executive who was hired in 2018 to turn the company around.
In the three years since his appointment, Kurumatani has repeatedly clashed with shareholders. At an extraordinary general meeting last month, Toshiba’s management suffered an embarrassing defeat after shareholders voted in favor of Effissimo’s proposal for an investigation into the company’s conduct at last year’s annual general meeting.
An offer from a non-Japanese private equity fund would require Japanese government approval and a Toshiba acquisition would be particularly sensitive because it operates the country’s nuclear plants.
However, CVC is no stranger to Toshiba. Kurumatani, a former banker, was chairman of the Japanese arm of the European fund before assuming the position of CEO of Toshiba. Yoshiaki Fujimori, CVC’s senior executive advisor in Japan, is also a member of the Japanese group’s board of directors.
The deal would be one of the largest leveraged acquisitions since the 2008 financial crisis, on the same scale as the € 17.2bn acquisition of Thyssenkrupp’s elevator business by Advent International and Cinven last year, according to Refinitiv.
CVC raised a fund of 21 billion euros last year for deals in Europe and America, and a separate Asian fund of 4.3 billion dollars, according to its website.
But buying Toshiba would mark a departure from the company’s usual trading style in the region, in which it generally buys pools that are valued between $ 250 million and $ 1.5 billion, according to its site. In February, he bought a majority stake in Shiseido’s personal care business.
Recent CVC deals included a £ 365 million stake in the Six Nations rugby tournament and stakes in two UK-based companies whose software is behind the launch of the NHS coronavirus vaccine.
Several private equity firms have previously pondered a bid for Toshiba, calculating that if they split the company, the sum of its parts could be greater than its current valuation, an industry adviser said. However, the adviser added, the size and complexity of the deal previously made it difficult to execute.
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