CVC Capital Partners is considering a $ 20 billion bid for a controlling stake in Toshiba that could privatize the Japanese industrial group and remove activist investors from its shareholder register, according to two people familiar with the negotiations.
The deal, which would be among the 20 biggest debt buybacks in history, would mark a new twist in a corporate saga that led Toshiba from a 2015 profit cushioning scandal and from the brink of bankruptcy two years later to a humiliating defeat in a showdown with its major shareholders last month.
CVC is expected to partner with other investment funds to fund the deal, which was first reported by Nikkei Asia. The Luxembourg-based buyout group declined to comment.
In a statement Wednesday, Toshiba said it would carefully consider an initial proposal received from CVC a day earlier.
The removal of 145-year-old Toshiba from the Tokyo Stock Exchange in a foreign-led deal would be a extremely symbolic movement, said advisers directly involved in the conglomerate, after years of heightened activism and acquisitions by foreign funds. US private equity firms such as Bain and KKR see Japan as one of the the richest target markets in the world.
But Toshiba has been particularly vulnerable. The company’s protracted financial crisis, which stemmed from the collapse of its nuclear business in the United States in 2017, was temporarily resolved when the company hired Goldman Sachs to execute a $ 5.3 billion emergency issue. equity.
Although the transaction was completed quickly, it left Toshiba’s shareholder register. crowded with funds from foreign activists – groups that may see the opportunity for a lucrative exit if the CVC deal comes at a high price.
Among Toshiba’s activist investors is the Singapore-based secret fund Effissimo, which is the group’s largest shareholder and which led the pressure on Nobuaki Kurumatani, the CEO who was hired in 2018 to run the company.
In the three years since his appointment, Kurumatani has faced several times 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 the conduct of the business at last year’s annual general meeting.
An offer from a non-Japanese private equity fund would require approval from the Japanese government, and a takeover of Toshiba would be particularly sensitive as it operates the country. nuclear plant.
CVC, however, is no stranger to Toshiba. Kurumatani, a former banker, was chairman of the Japanese branch of the European fund before taking over as CEO of Toshiba. Yoshiaki Fujimori, senior executive advisor of CVC in Japan, is also a member of the board of directors of the Japanese group.
The deal would be one of the biggest debt redemptions since the 2008 financial crisis, on the same scale as the Acquisition of € 17.2 billion 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 transactions in Europe and the Americas, and a separate Asian fund of $ 4.3 billion, according to its website.
But the Toshiba purchase would mark a departure from the company’s usual style of negotiation in the region, in which it typically buys groups worth between $ 250 million and $ 1.5 billion, according to its company. site. In February, he bought a controlling stake in Shiseido’s personal care business.
Several private equity firms have already considered an offer on Toshiba, believing that if the company is dissolved, the sum of its parts could be greater than its current valuation, an industry adviser said. However, the advisor added, the size and complexity of the transaction had previously made it difficult to complete.