KKR plans to outbid its rival CVC with a buyout offer of more than $ 20 billion for Toshiba as board members of the Japanese conglomerate prepare for a coup to oust the CEO, according to three people familiar with the case.
The prospect of a bidding war between rival private equity funds offers Japan the possibility that the ownership of one of its most famous industrial names could change hands in the largest ever leveraged buyout deal.
At least two of Toshiba’s largest shareholders have called on Toshiba’s board of directors to seriously consider all bids from private equity-led consortia, including likely a significant Japanese presence to meet regulatory sensitivity for a company that is closely involved involved in the nuclear and defense industry. .
A Toshiba board meeting on Wednesday is expected to discuss a proposal by one of its members to immediately resign Nobuaki Kurumatani as head of a company he has led since emerging from the financial crisis in 2018. Toshiba declined to comment on the proposal .
People close to the company, the largest investors of which are some of the region’s largest activist funds, said Toshiba’s senior management had been thrown into a ‘civil war’ by the emergence of a preliminary buyout approach from the European Union last week. private equity group CVC – a company for which Kurumatani previously worked as head of the Japanese operations.
But the stakes are about to be raised, with other groups, including Brookfield and KKR, ready to submit their own formal proposals, and as CVC prepares to provide more detail on how it would structure a bid on this scale .
Even before CVC submitted its proposal last week, there were signs of growing internal divisions, with some factions within Toshiba unhappy with the way Kurumatani dealt with his activist shareholders and the changes he has made since the takeover in 2018.
At the company’s annual shareholders meeting last year, Kurumatani only got a 57 percent support rate for his reelection, and earlier this year his attempts to defeat a shareholder-led proposal failed by an investor’s vote.
Conflicts within Toshiba now come people close to CVC said Luxembourg-based buyout fund was willing to give majority of control over Toshiba to domestic investors to make its $ 20 billion offer acceptable to the Japanese government .
“There is no strong preference for majority control,” said one person close to CVC. “The proposal can be adapted to its best form in consultation with the government.”
While most private equity firms prefer to acquire the majority of the companies they buy, the CVC deal could be structured in the same way as if a consortium led by US private equity group Bain Capital acquired Toshiba’s chip unit Kioxia in 2018. Bain held a 49.9 percent voting share in Kioxia, while Toshiba and optical products manufacturer Hoya together held the remaining 50.1 percent.
CVC has told Toshiba it plans to form a consortium, but it has not made clear who its co-investors will be. People close to the fund said it was open to working with investment funds backed by the Japanese government, such as Japan Investment Corporation, to get regulatory approval.
CVC, KKR and Brookfield, who acquired Westinghouse from Toshiba in 2018 after the US nuclear company filed for bankruptcy protection, declined to comment.