TOKYO (REUTERS) - Private equity firm CVC Capital Partners is proposing taking Toshiba Corp private in a deal worth about US$20 billion (S$26.8 billion), a person familiar with the matter said, as the Japanese tech giant faces pressure from activist shareholders to improve its governance.
If realised, the deal will shield management of the scandal-hit conglomerate, particularly chief executive Nobuaki Kurumatani, from scrutiny amid calls from large overseas shareholders for greater transparency from its board.
“Toshiba received an initial proposal yesterday, and will ask for further clarification and give it careful consideration,” the company said in a statement, without providing further details.
Mr Kurumatani told a group of reporters earlier that Toshiba’s board would discuss the proposal on Wednesday, according to the Nikkei business daily.
Shares in Toshiba were untraded in early trade with buy orders overwhelming sell orders.
Mr Kurumatani, a former banker at main Toshiba lender Sumitomo Mitsui Financial Group, headed the Japanese arm of CVC before joining Toshiba. One of Toshiba’s board members is a senior adviser at CVC Japan.
CVC is considering a 30 per cent premium over Toshiba’s current share price in a tender offer, said the source, who declined to be identified as the matter is private. That would put the value of the deal at nearly 2.3 trillion yen (S$28 billion) based on Tuesday’s closing share price of 3,830 yen.
The private equity firm declined to comment.
CVC is looking to expand in Japan, taking advantage of large Japanese companies under pressure to sell non-core assets and improve returns to shareholders. It is buying Shiseido Co’s lower-priced skincare and shampoo brands for US$1.5 billion.
An acquisition of Toshiba, one of Japan’s few manufacturers of nuclear power reactors, needs government approval.
The battle between activist investors and Toshiba management is seen as a test case for whether the established giants of corporate Japan can respond to calls for better governance.
The Japanese firm has been under pressure from activist funds since it sold 600 billion yen of stock to dozens of foreign hedge funds during a crisis stemming from the bankruptcy of its U.S. nuclear power unit in 2017.
“I think that it’s important to separate Toshiba the company from the incentives for management,” said LightStream Research analyst Mio Kato, who publishes on investment research platform Smartkarma.
“The incentives for management would be to have a friendly shareholder who would keep them in place. There is the government to consider as well for Toshiba as they seem to have been heavily involved behind the scenes. If this deal has tacit approval from the government there could be a fight with activists.”