Business Offer Based on a 30% Premium
In a brief statement released early this morning, Toshiba confirmed it received an initial proposal from CVC Capital Partners yesterday. The company will review the proposal today, according to the statement.
“Toshiba received an initial proposal yesterday, and will ask for further clarification and give it careful consideration. The company will make a further announcement in due course.”
CVC Capital has offered a 30% premium in a tender offer submitted yesterday. The offer is based on yesterday’s closing share price of ¥3,830 ($34.89), which values the Japanese company at around $15.8 billion. Once the offered premium is included, the CVC business offer translates to nearly $21 billion.
Shares of Toshiba gapped over 18% higher this morning in Tokyo on CVC news. The trading was halted due to a high interest in buying shares of Toshiba. Based on today’s closing price, the company is valued at nearly $19 billion. Business analyst Mia Kato from LightStream Research believes the offer is too low.
“We believe that current shareholders, especially activists, will want a rather steep price,” the analyst said in a memo.
If the business deal is accepted, it will mark one of the biggest buyouts in the history of Asia. In 2018, Toshiba sold its memory business unit to Bain Capital in a business deal valued at $18 billion.
The CVC Capital offer comes at a troubled time for the Japanese company. Just a few weeks ago, shareholders approved an investigation into the company’s recent practices. Shareholder Effissimo Capital Management rallied support of other shareholders to initiate an investigation into allegations that business investors were pressured to agree with proposals coming from the current management team.
The company has been hit with numerous scandals in recent years, including the bankruptcy of its US nuclear power unit in 2017.
“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,” Kato adds.
Moreover, the Japanese government is likely to scrutinize any potential deal between CVC Capital and Toshiba. Chief Cabinet Secretary Katsunobu Kato said today that the government will want to make sure that Toshiba’s work on infrastructure is not disrupted.
Despite troubling times, Toshiba is still one of the largest and most important Japanese companies. Some of its business units are closely working with the government; hence industry experts such as Takuro Hayashi believe it is “a little unrealistic” for Toshiba to become a private company owned by a foreign entity.
Japanese company Toshiba has received a business offer worth more than $20 billion from the private equity company CVC Capital Partners. Industry analysts argue that the deal is unlikely to go through due to a low price offered by CVC, as well as concerns over a foreign entity owning an important national company.