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CVC considers bid for Toshiba for US$20 billion



According to two people familiar with the matter, CVC Capital Partners is considering a US$20 billion bid for a majority stake in Toshiba, which may privatize the Japanese industrial group and remove activist investors from its shareholder register.

This transaction will be among the 20 largest leveraged buyouts in history, marking another twist in the company’s legend, which turned Toshiba from a profit scandal in 2015 and the brink of bankruptcy two years later into a bankruptcy. Shameful failure. A showdown with the largest shareholder last month.

According to Nikkei Asia, CVC is expected to cooperate with other investment funds to raise funds for the transaction. The Luxembourg-based acquiring group declined to comment.

Toshiba said in a statement on Wednesday that it will carefully study the preliminary recommendations received from CVC the day before.

The consultant directly related to this conglomerate said that after years of active actions and acquisitions by overseas funds, the withdrawal of the 1

45-year-old Toshiba from the Tokyo Stock Exchange with foreign-led transactions would be a huge one. Symbolic move. American private equity firms such as Bain and KKR regard Japan as one of the most targeted markets in the world.

But Toshiba is particularly vulnerable. The company’s protracted financial crisis originated from the collapse of the US nuclear power business in 2017, and it temporarily resolved the crisis when the company hired Goldman Sachs to issue an emergency US$5.3 billion equity.

Although the transaction was completed quickly, Toshiba’s shareholder register was flooded with foreign activist funds. If the CVC transaction is completed at a high price, these groups may see a profitable exit opportunity.

Toshiba’s activist investors include the Singapore-based secret fund Effissimo, which is the group’s largest shareholder and put pressure on the company’s CEO Nobuaki Kurumatani, who was 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 of shareholders last month, Toshiba’s management suffered an embarrassing defeat after shareholders voted in favor of Ephesus’ proposal to request an investigation into the company’s behavior at last year’s annual general meeting.

The bidding of non-Japanese private equity funds will require the approval of the Japanese government, and the acquisition of Toshiba will be particularly sensitive because it operates nuclear power plants in the country.

However, CVC is no stranger to Toshiba. The former banker Kurumatani served as the president of the Japanese branch of the European Fund and then took over as the chief executive officer of Toshiba. Yoshiaki Fujimori, senior executive consultant of CVC Japan, is also a member of the board of directors of the Japan Group.

According to data from Refinitiv, this transaction will be one of the largest leveraged buyouts since the 2008 financial crisis, and its scale is the same as that of Advent International and Cinven’s purchase of ThyssenKrupp’s elevator business for 17.2 billion euros last year.

According to its website, CVC raised 21 billion euros in funding for transactions in Europe and the Americas last year, along with an additional $4.3 billion in Asian funds.

However, the acquisition of Toshiba would mark a departure from the company’s usual trading methods in the region. In this region, Toshiba usually acquires groups worth between 250 million and 1.5 billion U.S. dollars. In February of this year, it bought a majority stake in Shiseido’s personal care business.

CVC’s recent transactions include a £365 million stake in the Six Nations Rugby Championship, as well as shares in two British software companies whose software is behind the launch of the NHS coronavirus vaccine.

An industry consultant said that several private equity companies had previously considered bidding for Toshiba and calculated that if Toshiba were to be broken up, the sum of its components might be greater than its current valuation. However, the consultant added that the scale and complexity of the deal was difficult to achieve before.

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