Japan’s Toshiba considers $20bn take-private deal

Toshiba’s board, which includes Kurumatani who joined Toshiba from CVC, and Yoshiaki Fujimori, a senior adviser at the private equity firm, discussed the proposal on Wednesday, the source with knowledge of the proposal said.

Shares in Toshiba soared 18% to their daily-limit on Wednesday.

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

LightStream Research analyst Mio Kato, who publishes on investment research platform Smartkarma, described that offer price as too low.

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

If they accepted the current offer it would still be the biggest private equity-led deal in Asia Pacific this year, surpassing Blackstone’s $6 billion offer for Crown Resorts Ltd in Australia, according to Refinitiv data. It would also be 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 returns to shareholders. Other deals by the private equity firm include the $1.5 billion purchase of Shiseido Co’s lower-priced skincare and shampoo brands.

Any approval by Toshiba’s board will face regulatory review, because Toshiba, which makes products ranging from escalators to sewerage plants, is one of only a handful of companies able to build nuclear reactors and manufactures other sensitive equipment, including lithium-ion batteries for Japan’s military submarines.

Japan’s government would want to ensure that Toshiba’s work on infrastructure was not disrupted, Chief Cabinet Secretary Katsunobu Kato said in a press briefing.

“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.