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Business deals

CVC to enlist Japanese companies in Toshiba takeover bid

Private equity firm aims to take conglomerate private as early as October

Private equity firm CVC plans to offer 5,000 yen per share to acquire Toshiba, a 30% premium over its recent share price.   © Reuters

TOKYO -- Private equity firm CVC Capital Partners plans to enlist Japanese companies and a state-backed investment fund in its $20 billion bid to acquire Toshiba, Nikkei has learned.

Under CVC's proposal, it would pay 5,000 yen ($45.61) per share for the engineering conglomerate and delist it from the Tokyo Stock Exchange as early as October. It would then work to raise its corporate value in order to relist the company about three years later.

CVC sent this initial proposal to Toshiba on Tuesday and is planning to submit a more detailed plan soon.

The firm said in its proposal that it expects Japan Investment Corp., a state-backed investment fund, and the Development Bank of Japan to participate in the acquisition, along with other businesses. The final proposal, with the names of all participants, is expected to be compiled in June, with the take-over bid to start by early July.

DBJ told Nikkei that it "cannot comment on individual projects," while JIC declined to comment.

Toshiba said earlier on Friday that it was awaiting more clarity on the firm's offer but warned of financing and regulatory hurdles facing such a deal.

Because it is involved in nuclear power, Toshiba falls under the purview of the Foreign Exchange and Foreign Trade Act of Japan, or FEFTA, which regulates equity purchases by foreign entities in companies deemed critical to Japan's national security. This means the deal would have to be approved by Japan's finance ministry and the industry ministry. CVC has stressed it would "work well with the government and related ministries."

The proposed purchase price is about 30% higher than the recent share price, in line with earlier reports.

The deal could help Toshiba escape its activist investors who have been clashing with the company over corporate governance and strategic issues. Confrontation was anticipated over the shareholder meeting in June to reappoint its CEO and President Nobuaki Kurumatani. There are still possibilities of Toshiba's board members opposing CVC's proposal, since some are cautious about delisting.

Founded in 1981 in the U.K., CVC has a track record of investing in Japanese companies, including restaurant chain Skylark and a personal care unit of Shiseido. Kurumatani was chairman of CVC's Japan office in 2017 and 2018, a fact that some legal experts say could raise concerns over conflicts of interest.

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