Private equity

Markets brace for possible Toshiba mega takeover deal

Posted by MoneyController on 08.04.2021

Japanese firm Toshiba has received a 20.8 billion dollar buyout offer from CVC Capital Partners, the company announced yesterday. The offer prices the company at a 30% premium to its closing share price on Tuesday. 

Toshiba has had its fair share of drama, with a financial scandal in 2015 followed by a threat of bankruptcy, which the company barely managed to survive. More recently, the company has experienced a shareholder revolt, with Effissimo Capital Management, a firm that holds a 9.9% stake in the company, asking for an investigation into voting irregularities at last year’s AGM. What was once a symbol of Japan’s technological advancement was reduced to a second-tier company on the Tokyo Stock Exchange. Recently, however, the company has staged a comeback, and in January this year it regained its position as a first-tier company. 

The buyout offer gives the company management a chance to escape the stranglehold of activist investors. As a result, the deal would allow for faster decision-making and focus on the core issues the company is facing. The company intends to focus on its renewable energy business as well as a few other core businesses. Going private will give it the resources and time it needs to redevelop itself. 

Shares of the company were halted during trading yesterday as news came out that the company would consider the buyout offer later in the day. If Toshiba accepts the buyout offer, it will add to the flurry of takeovers markets have experienced in recent months.  Increased activity in mergers and acquisitions has come about largely because investors are increasingly handing over their money to private equity firms in order to improve their returns in times of low-interest rates. In fact, shares often trade higher than the buyout price because of expectations that another PE firm will come forward with a better offer. Toshiba was no different as its US-listed shares jumped 20% after the news became public. 

Nobuaki Kurumatani, CEO of Toshiba, said the company will discuss the offer in a board meeting. While many have speculated the board meeting will happen within a day or two, that is not a given. The fact that the company is involved in managing nuclear power stations means the buyout offer will eventually need to be approved by the government, which will make matters a bit more complicated.

 

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