(Bloomberg) -- CVC Capital Partners has offered about 5,000 yen per share to buy out Toshiba Corp., according to an executive at the Japanese conglomerate.
Toshiba’s board plans to form a special committee to consider the proposal, said the executive, who asked not to be identified discussing confidential information. A bid at that level would value Toshiba at about 2.28 trillion yen ($20.7 billion), according to data compiled by Bloomberg.
An offer of 5,000 yen would represent a 31% premium to Toshiba’s closing price on Tuesday, before news of the bid emerged. CVC’s proposal doesn’t currently include any other funds, the executive said.
Toshiba hasn’t yet discussed CVC’s offer with Effissimo Capital Management, the Singapore-based fund that ranks as its biggest shareholder, the executive said.
The Japanese company confirmed earlier Wednesday that it had received a preliminary offer from CVC, without revealing the level of the bid. Toshiba said it will carefully assess the proposal and make further disclosures when necessary. The company’s shares surged 18%, the daily limit, in Tokyo on the news.
CVC’s offer, which sets the stage for potentially the largest private equity-led acquisition in years, comes as Toshiba faces scrutiny from activists following a series of scandals, including a record fine for faulty accounting, billions of dollars in writedowns and a bungled foray into U.S. nuclear power. The company brought in Chief Executive Officer Nobuaki Kurumatani -- a former senior CVC executive -- to repair investor confidence. The Japanese conglomerate today remains a major player in defense and energy at home and owns a major slice of Kioxia Holdings Corp., which is said to be focused on pursuing an initial public offering as soon as this summer.
“The shareholders may be receptive given that the deal appears to offer a premium,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. But “the government will also need to give its approval because of Toshiba’s involvement in defense. There are still a lot of questions around whether this kind of deal is achievable at all.”
Toshiba’s involvement in a number of sensitive industries may complicate government approval for a sale to a foreign entity. A takeover faces government scrutiny due to its deep involvement in decommissioning the wrecked Fukushima Dai-Ichi nuclear power plant, a process that will take decades. The company developed a system to purify tainted radioactive water seeping into the facility, and is working with the utility to devise a plan to search for and remove melted fuel debris at the bottom of the reactors.
Regulators aside, Kurumatani -- the first outsider to lead Toshiba in more than 50 years -- may also have to grapple with unhappy shareholders. Last month, investors passed a resolution put forward by Singapore-based Effissimo Capital Management, Toshiba’s largest shareholder, calling for an investigation into the fairness of voting at the 2020 annual shareholders’ meeting.
A Toshiba deal would be the second initiated in Japan this year by CVC, which is buying Shiseido Co.’s personal care unit in a $1.5 billion deal. The buyout firm, which tends to focus on smaller-sized deals than the one it’s said to be contemplating for Toshiba, was said to have completed a 21.3 billion-euro ($24 billion) fundraising for its eighth flagship fund last year.
Private equity firms have announced $15.1 billion of deals targeting Japanese firms over the past 12 months, according to data compiled by Bloomberg.