Daily Management Review

Japanese Conglomerate Toshiba Contemplating A $20 Bln Take-Private Deal


Japanese Conglomerate Toshiba Contemplating A $20 Bln Take-Private Deal
An offer of $20 billion proposed to the Japan’s Toshiba Corp for taking it private is being contemplated by the company, said reports quoting information from sources familiar with the matter. The firm to make the offer is the private equity firm CVC Capital Partners.
There is activist shareholder pressure on the Japanese industrial conglomerate to improve its corporate governance.
According to reports, senior managers of the Toshiba – including Chief Executive Nobuaki Kurumatani, could get away from scrutiny if the deal goes through. Just three weeks ago, an independent probe into the scandal-hit company was approved by its shareholders. But given the amount of government tasks that Toshiba does, any deal is likely to invite regulatory review.
“Toshiba received an initial proposal yesterday, and will ask for further clarification and give it careful consideration,” Toshiba said in a statement, but did not provide any further details.
Toshiba’s board was set to discuss the deal offer very soon, said reports quoting the sources.
CVC plans to make a tender offer which pegs the value of the deal at almost 2.3 trillion yen ($21 billion) based on Tuesday’s closing share price of 3,830 yen as the proposal plans to offer a 30 per cent premium over the Japanese firm’s current share price, said reports quoting information from sources.
The offer price was however described as being tool low by LightStream Research analyst Mio Kato, who publishes on investment research platform Smartkarma. “We believe that current shareholders, especially activists, will want a rather steep price,” he said in research note.
But even if this lower than expected offer is accepted by Toshiba, it would still mark the largest private equity-led deal in the Asia Pacific region for current year and would easily surpass the $6 billion offer for Crown Resorts Ltd in Australia by Blackstone, as showed in Refinitiv data. It would also be CVC’s biggest foray into the region so far.
There was no comment on the issue available from CVC.
This is also another opportunity for the equity form CVC to grow further into Japan where there is increasing pressure on large companies to divest their non-core assets and offer better returns on investment to their share shareholders. The $1.5 billion purchase of Shiseido Co’s lower-priced skincare and shampoo brands is among the other deals by the private equity firm.
According to analysts, of the deal is approved by Toshiba’s board, it is likely to draw regulatory scrutiny. This is because apart from making products ranging from escalators to sewerage plants, Toshiba is among those few Japanese companies that have the technology and knowhow to build nuclear reactors as well as other sensitive equipment which includes including lithium-ion batteries that are used in powering the submarines of Japan’s military.
Chief Cabinet Secretary Katsunobu Kato said in a press briefing that Japan’s government would want to ensure that Toshiba’s work on infrastructure was not disrupted. “Even though it faced bankruptcy Toshiba is still one of Japan’s leading companies. It also has many businesses linked to government policies, so it seems a little unrealistic for it to become a foreign-owned private company,” said Takuro Hayashi, an analyst at Iwai Cosmo Securities.