CVC Capital Partners, a British private equity fund, is remaining tight-lipped on its offer to buy out Toshiba. Despite this, Toshiba’s shares rose 18% on Wednesday to close at $41.26. This is its highest level since December 2016, after trading on the shares was temporarily halted in light of the news.
This gives the company a market capitalization of close to $19 billion. According to the Nikkei newspaper, CVC Capital partners are offering a 30% premium. This would value Toshiba at just over $20 billion.
Toshiba’s Chief Executive, Nobuaki Kurumatani, confirmed the offer, saying that the matter would be discussed in a board meeting. Before taking over as Chief Executive at the Japanese firm Mr. Kurumatani was head of CVC’s Japan unit.
The move is the biggest part yet of CVC’s plans to expand its Japanese operations. Already the group has bought Shiseido, a low-cost skincare and shampoo brand for $1.5 billion.
If it were to go ahead, the deal would constitute one of the largest leveraged buyouts in history, and possibly the largest ever in Asia. Toshiba has been here before as far as large buyouts go. In 2018 a deal lead by Bain Capital, acquired Toshiba’s flash memory sector.
At the time, Toshiba was still facing fallout from an accounting scandal that emerged in 2015 and from which it has never fully recovered. As well as selling its flash-memory operations (it retained a minority holding), it also sold medical, appliance, and consumer electronics businesses. Since then, it has focused on industrial aspects such as infrastructure and energy.
The Japanese government may still veto the deal. Because Toshiba is involved in domestic infrastructure businesses within Japan, including maintenance of nuclear plants, the government will need to issue its approval before the deal can go ahead.
According to Okasan Securities chief strategist, this would add uncertainty to the deal. However, he also noted that the simplification of Toshiba’s shareholder structure could be appealing to regulators because of recent disputes between Toshiba’s management and foreign shareholders.
When asked about the potential takeover, Japan’s chief government spokesman, Katsunobu Kato would only say that it was important to keep the business running stably. Recent events at the company would say that this is far from the case right now.
At a special shareholders meeting in March, shareholders approved a proposal by Effissimo Capital Management. This was to appoint investigators to determine whether voting at a shareholders meeting in 2020, was conducted fairly.
Toshiba has faced a growing influence from foreign shareholders, partially fueled by its need to raise billions of dollars in 2017 after the collapse of the Westinghouse Electric Co. Westinghouse was a Toshiba nuclear subsidiary.
Toshiba was once one of the biggest names in electronics, riding at the forefront of Japan’s consumer boom. But for years now it has been a troubled organization. The Japanese government would likely sanction any deal that would bring some harmony back to the group.