The holding company CVC offers 18 billion euros. Without a stock market listing, the Japanese company can avoid trouble with activist shareholders.
Dhe Japanese Toshiba group is examining an almost 18 billion euro purchase offer from European private equity firm CVC Capital Partners to leave the stock exchange. Toshiba confirmed a corresponding report by the Japanese business newspaper Nikkei on Wednesday. The withdrawal from the stock market would be a surprising twist in the long-standing saga of the traditional Japanese company that began to falter after a balance sheet scandal in 2015. The development was also ironic after Toshiba had made particular efforts in recent years to avoid being expelled from the stock exchange.
According to media reports, CVC is considering a premium of 30 percent on Toshiba’s share price. Based on Tuesday’s closing price, that would be worth almost 2.3 trillion yen (17.7 billion euros). Other investors are to be involved. Trading in Toshiba’s stock was suspended on Wednesday after the price rose 18 percent. The company received the offer on Tuesday, will seek further clarification and carefully examine the offer, it said in a statement. Toshiba’s boss and president Nobuaki Kurumatani told journalists that the board of directors would discuss the offer on Wednesday.
Kurumatani, who was the first outsider to take over the management of Toshiba three years ago in more than 50 years, previously headed CVC’s Japan business himself. Another member of Toshiba’s board of directors, Yoshiako Fujimori, is an advisor to the holding company. The offer by the foreign CVC would require the approval of the Ministry of Finance because Toshiba is involved in sensitive economic areas such as nuclear energy. Toshiba would have to ensure that its infrastructure works in Japan would not be disrupted, said a government spokesman.
The group is one of the few companies in Japan that can build nuclear power plants and that is involved in the operation of the Japanese reactors. Toshiba also builds batteries for Japan’s submarines. If Toshiba were to be bought off the stock exchange, it could avoid trouble with activist foreign shareholders, of which there have been some in recent years. The decision is also a test of how seriously the voice of shareholders is viewed in Japan.
Victory for shareholder democracy
As recently as March, at an extraordinary general meeting at the request of the hedge fund Effissimo Capital Management from Singapore, the shareholders of the company decided to conduct an external investigation into irregularities during the regular general meeting last year. The decision was seen as a victory for shareholder democracy in Japan.
Toshiba found itself in difficult waters after falsification of the balance sheet that was uncovered in 2015 and after the bankruptcy of the American nuclear subsidiary Westinghouse. To secure the company, Toshiba sold the silverware with the memory chip business to a group of investors around the American investment company Bain Capital. In order to avoid being expelled from the Tokyo Stock Exchange in 2017, Toshiba raised 600 billion yen (around 4.6 billion euros) of capital by issuing new shares. Through this transaction, the company brought many foreign equity funds on board as shareholders.