According to two people familiar with the negotiations, CVC Capital Partners weighs more than $ 20 billion for a majority stake in Toshiba, which could take the private Japanese industrial group and remove activist investors from its shareholder register.
The deal, which will rank among the 20 largest leverage buyouts in history, will mark another turning point in the corporate saga that led Toshiba from a profit-bribing scandal in 2015 and the brink of bankruptcy two years later to humiliating defeat in a dispute with its largest shareholders last month.
CVC is expected to partner with other investment funds to finance the deal, which was first announced by Nikkei Asia. The Luxembourg-based buying group declined to comment.
In a statement Wednesday, Toshiba said it would carefully examine the initial proposal received from CVC a day earlier.
But Toshiba is particularly vulnerable. The company’s ongoing financial crisis, which stemmed from the collapse of the US nuclear business in 2017, was temporarily resolved when the company hired Goldman Sachs to issue an emergency equity of $ 5.3 billion.
Although the deal was completed quickly, it left Toshiba’s shareholder register heavily populated with foreign activist groups – groups that may see a profitable outcome if the CVC deal is completed with a large premium.
Toshiba’s activist investors include the secret Singapore fund Effissimo, which is the largest shareholder in the group and is putting pressure on Nobuaki Kurumatani, a CEO 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 to investigate the company’s behavior during the annual general meeting.
An offer from a non-Japanese private equity fund will require approval from the Japanese government, and Toshiba’s takeover will be particularly sensitive as it operates the country’s nuclear power plants.
However, CVC is no stranger to Toshiba. Kurumatani, a former banker, was president of the Japanese branch of the European Fund before taking over as CEO of Toshiba. Yoshiaki Fujimori, senior executive adviser to CVC in Japan, is also a board member of the Japanese group.
The deal will be one of the largest buyouts with a financial crisis since 2008, on the same scale as Thyssenkrupp’s acquisition of 17.2 billion euros in lifts from Advent International and Cinven last year, according to Refinitiv.
Last year, CVC raised a fund of 21 billion euros for deals in Europe and America and a separate Asian fund for 4.3 billion dollars, according to its website.
But buying Toshiba would mean a departure from the company’s usual bargaining style in the region, where it typically buys groups valued at between $ 250 billion and $ 1.5 billion, according to its website. In February, it bought a majority stake. share in Shiseido’s personal care business.
CVC’s recent deals included £ 365 million in the Six Nations rugby tournament and stakes in two UK-based companies whose software is behind the release of the NHS coronavirus vaccine.
Several private equity firms have previously made an offer to Toshiba, estimating that if they break up the company, the amount 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 had previously hampered execution.
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