Private equity firm Bain Capital could take Japanese conglomerate Toshiba private, report says

FILE PHOTO: The logo of Toshiba Corp is seen as Window cleaners work on the company's headquarters in Tokyo, Japan, February 14, 2017. REUTERS/Toru Hanai
The logo of Toshiba Corp is seen as Window cleaners work on the company’s headquarters in Tokyo

US private equity firm Bain Capital could take the Japanese conglomerate Toshiba private, sources told Reuters on Wednesday.

Bain Capital has started talks with Japanese banks that could help finance the deal, according to Reuters. The US financial firm may collaborate with peers for a co-investment into the struggling Japanese company.

Toshiba produces a wide range of products such as elevators, nuclear technology, semiconductors, home electronics, batteries, medical equipment and IT products. Until it sold off its majority stakes in its flash memory unit in 2017, it was one of the major players in the chip industry.

Bain Capital was involved in the sell-off of Toshiba’s flash memory unit, now known as Kioxia Holdings. Toshiba still has 40% stakes in its former division.

The company has however faced issues since then, plagued by accounting scandals and running up losses in its US nuclear business. Yet it remains a major producer of Japanese military equipment and plays a role in the country’s energy supply as a leader in nuclear power.

Toshiba’s stock price reached two-year lows in the first quarter, but has since recovered, albeit shakily. On Wednesday, stock fell by 3.3% and closed at 4,205.00 yen ($38.92).

Earlier this month, private equity and advisory firm CVC Capital Partners had made a $20 billion offer to take the firm private, which sparked controversy amongst Toshiba executives. Toshiba’s chief executive Nobuaki Kurumatani stepped down shortly afterwards and has been replaced with the former chairman of the company, Satoshi Tsunakawa.

After the tumultuous reaction, CVC Capital distanced itself from the plans on Tuesday, saying in a letter, it would “step aside” for now, Reuters said.

Various other firms have also been said to be thinking about bidding on a Toshiba takeover, including Japanese banks and North American financial firms.

If the deal goes through, Toshiba would be one of the few companies going against the current wave of companies going public.

Regulatory changes in the US have meant direct listings are more accessible and SPACs have become a thriving market. This has been fueled by an increase in retail investing and companies’ desire to become publicly traded as soon as possible, based on the idea that this will drive profitability. From the start of the year to mid-March, more special purpose acquisition companies had listed than in the whole of 2020, but not all of them have met with red-hot success.

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Toshiba’s CEO has stepped down but board members planned to oust him before the controversy over a $20 billion buyout bid, sources say

Toshiba Corp Chief Executive Nobuaki Kurumatani
Toshiba Corp chief executive Nobuaki Kurumatani.

  • Toshiba board members planned to replace Nobuaki Kurumatani before the buyout bid, sources said.
  • Kurumatani resigned from Toshiba on Wednesday. Chairman Satoshi Tsunakawa will replace him.
  • The board chairman Osamu Nagayama went to a meeting “to fire” him, one of the sources told Reuters.
  • See more stories on Insider’s business page.

Toshiba board members planned to oust CEO Nobuaki Kurumatani before CVC Capital Partners launched a $20 billion buyout bid last week, sources told Reuters.

Kurumatani on Wednesday resigned from Toshiba. Chairman Satoshi Tsunakawa, who led the company beforehand, will replace him.

The board told Kurumatani the day before the offer was announced that they would replace him, sources who didn’t want to be identified because of the sensitivity of the issue told Reuters.

On the subject of Kurumatani stepping down, Toshiba told Insider: “It is a resignation in the middle of the CEO’s term of office, which is unusual, but the resignation is decided by Mr. Kurumatani himself and should be respected.”

Two members of Toshiba Corp’s nomination committee, including board chairman Osamu Nagayama, met Kurumatani, himself a former CVC executive, before the buyout bid and told him they were looking for a new CEO, sources told Reuters.

Although the board hadn’t formally started the process of replacing Kurumatani, the plan was already in motion, Reuters reported. Nagayama, who also heads the nomination committee, went to the meeting “to fire” him, one of the sources said.

Reuters reported that Kurumatani then informed them of the European private equity firm’s plan to take Toshiba private. A day later, the Japanese conglomerate announced it had received the offer, two sources added.

The events of the meeting show how Kurumatani’s tenure was undone by his flagging popularity even before the offer was announced. It marked the culmination of deepening discord between Kurumatani and activist shareholders, who had raised concern over what they said were governance issues.

The plan to remove him appears to have accelerated after the meeting on April 6 at Toshiba’s headquarters in Tokyo. Toshiba on Wednesday said Kurumatani was stepping down after some three years as CEO.

Support for him both within the company and among investors had eroded, a person briefed on the matter said.

“A survey of managers at Toshiba showed low support for Kurumatani,” the person who was briefed said. There was “deep distrust” of him among shareholders, they added.

Toshiba said Kurumatani was stepping down to “recharge” after achieving his plan to revive the conglomerate that had been weakened by an accounting scandal.

Reuters was not immediately able to reach Kurumatani for comment about plans to have him replaced. Toshiba said it couldn’t comment on speculation. Nagayama declined to comment. A representative for CVC Japan declined to comment.

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