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CVC steps back from plans to take Toshiba private

CVC Capital Partners has taken a major step back from its plans to take Toshiba private in Japan’s biggest leveraged buyout in a letter telling the company it would “step aside” for now.

The letter follows a dramatic week-long sequence of events that began on April 7 with the leak of CVC’s proposed $20bn offer and culminated with the abrupt resignation of Toshiba’s chief executive Nobuaki Kurumatani.

CVC’s original plans envisaged a central role for Kurumatani, who had previously worked as head of CVC in Japan.

CVC’s letter, which has been seen by the Financial Times, stated: “Our offer was and continues to be contingent on obtaining the full support of your board and management team. CVC has no intention of commencing a tender offer without first obtaining the consent of your board of directors.”

It added: “Our understanding . . . is that for now you plan to give priority to communication with shareholders. Therefore, we respectfully step aside to await your guidance as to whether a privatisation of Toshiba will suit management’s and the board of directors’ strategic objectives.”

In a statement on Tuesday, Toshiba reiterated that it remained “impossible” to evaluate the European private equity group’s offer.

“This letter contained no specific and detailed information capable of detailed evaluation,” the company said. “It merely stated that CVC would step aside to await our guidance.”

CVC was not immediately available for comment. 

CVC’s preliminary proposal this month had raised prospects of a bidding war as KKR and other private equity groups began considering rival offers that could outbid CVC’s ¥5,000 ($46) a share offer. 

Since the proposal came to light, shares in Toshiba have surged 13 per cent to ¥4,350.

But the departure of Kurumatani, who was brought into Toshiba in 2018 to manage a turnround, removes a business leader with close government relationships that would have been vital to navigating a buyout of such a sensitive company.

Toshiba is unique among Japanese groups for a number of reasons. It has nuclear and defence businesses but, at the same time, some of its largest shareholders are activist funds that have called on the company to take seriously any outside approach.

“I don’t think that whatever is in CVC’s letter or in the company’s public reaction to it rules out the possibility that private equity is going to play a potentially important role in Toshiba’s future. I’m sure that plans are still being formed,” said a person who has worked closely with major private equity groups in Japan.

While noting various hurdles to taking the company private, Toshiba said it would “seriously consider and evaluate any credible offers”, and that the board would appoint financial and legal advisers to make the process transparent.


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