October 16, 2017 4:51 am JST
Interview

Bain plans to inject $9bn into Toshiba Memory for growth

Executive expects success in tender offer for ADK

Yuji Sugimoto

TOKYO -- Bain Capital has been quite active in Japan lately, having led a U.S.-Japan-South Korean consortium to buy Toshiba Memory from its troubled parent, Toshiba, and launching a tender offer to purchase advertiser Asatsu-DK despite opposition from its leading shareholder, British-based agency WPP.

Yuji Sugimoto, managing director at Bain, spoke to The Nikkei about the private equity firm's plans for the Japanese company, including the more than 1 trillion yen ($8.9 billion) that will be provided to Toshiba Memory before it goes public.

Exerpts of the interview follow:

Q: Including personnel and additional funding, what are your management plans for Toshiba Memory?

A: There will be no structural overhaul of Toshiba Memory; instead we will offer support for growth. We respect the current lineup of executives, but when it comes to directors, who play an oversight role, we will be aggressive in enlisting outsiders. I myself will become a director.

As for expenses necessary for growth, such as R&D and investment, we will not be stingy in offering additional support. We will use a variety of fundraising methods to furnish it. The partners will probably provide more than 1 trillion yen to aid Toshiba Memory until it is listed. We will not be frugal when it comes to investing in people either. No cutback in the number of employees is being considered, and there may even be an increase.

Q: What are the odds of victory in the legal fight with Western Digital?

A: It's not about winning or losing; it's about what kind of agreement is arrived at. It's extremely unlikely that the court will rule entirely on Western Digital's side, but even if it does, it will just gain production equipment held by a joint venture that's just a paper company. If they don't gain a production operation that includes employees, that's probably not really a "win" for them. We are thinking of how to arrive at an agreement.

Q: Bain's tender offer for ADK is opposed by WPP, which owns a 25% stake in the Japanese advertiser. Will you be able to achieve the benchmark goal of a 50.1% stake?

A: The odds of success are high. Even if we don't achieve the two-thirds stake necessary for a special resolution [to take the agency private], we can still undertake management reforms even as it maintains its listing. 

Q: What is the attraction of ADK?

A: It is No. 3 in the [Japanese] advertising sector, but it occupies a creative niche with its strength in animation. We can support overseas expansion using animation. We are giving absolutely no consideration to staff cuts; we will instead be investing in growth fields such animation and digital.

Q: Will Bain continue its aggressive investment in Japan?

A: Japan is one of the most important markets for Bain. We are backed by many investors, so we can raise the necessary funds. Stock prices may be high, but there are many stocks of companies that are undervalued compared to their true strengths. There are still plenty of investment targets. The problem is staffing. If we don't increase employment, we cannot chase those targets.

(Nikkei)

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 11,503.25M
Shares: 4,237.60M

ASATSU-DK, Inc

Japan

Market(Ticker): TKS(9747)
Sector:
Industry:
Commercial Services
Advertising/Marketing Services
Market cap(USD): 1,365.41M
Shares: 41.75M

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