Toshiba Corp evaluating $20 billion take-private offer from private equity firm CVC Capital Partners

In a significant development, a source familiar with the matter at hand has revealed, Toshiba Corp is weighing option which include a $20 billion offer from CVC Capital Partners, a private equity firm, to take it private. The development comes in the wake of the company facing increasing pressure from activist investors to improve its corporate governance.

The potential deal comes just three weeks after shareholders approved an independent probe into the scandal-hit company, which could potentially shield managers, especially its CEO Nobuaki Kurumatani, from that scrutiny, at the cost of inviting regulatory review.

“Toshiba received an initial proposal yesterday, and will ask for further clarification and give it careful consideration,” said Toshiba in a statement without providing any further details.

According to the source with knowledge of the proposal, Toshiba’s board, which includes Kurumatani, and Yoshiaki Fujimori, a senior advisor at the private equity firm, will discuss the proposal on Wednesday.

Toshiba’s shares were untraded in morning trade with buy orders overwhelming sell orders.

CVC is considering a 30% premium over Toshiba’s current share price in a tender offer, putting the value of the deal at nearly $21 billion (2.3 trillion yen) based on Tuesday’s closing share price of 3,830 yen, said the source.

That offer price was described as being too low by LightStream Research analyst Mio Kato.

“We believe that current shareholders, especially activists, will want a rather steep price,” he said in research note.

In the event the deal goes through at the current offer price, it would mark the biggest private equity-led deal in Asia Pacific this year, surpassing Blackstone’s $6 billion offer for Crown Resorts Ltd in Australia. It would also mark CVC’s biggest foray into the region so far.

For CVC, which declined to comment, the proposal represents another chance to expand in Japan where large companies are under pressure to sell non-core assets and improve shareholders returns.

Any approval by Toshiba’s board will face regulatory scrutiny since Toshiba, which makes a whole range of products starting from escalators to sewerage plants, is one of only a handful of companies able to build nuclear reactors and manufacturers sensitive equipment, including lithium-ion batteries for Japan’s military.

In a press briefing, Chief Cabinet Secretary Katsunobu Kato said, the Japanese government will want to ensure that Toshiba’s work on infrastructure does not get 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,” opined Takuro Hayashi, an analyst at Iwai Cosmo Securities.

 ($1 = 109.5600 yen)



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