Mega LBOs are back: Toshiba ADRs soared 22% following a Nikkei report that private equity giant CVC Capital Partners has offered to acquire Toshiba through a tender offer that is expected to be worth more than $20 billion, and a formal proposal is expected as early as Wednesday.
According to the report, CVC is considering a 30% premium over the Japanese industrial group's current share price, which would put the value of the deal at nearly 2.3 trillion yen ($20.8 billion) based on Tuesday's close. Due to the size of the deal, CVC will consider recruiting other investors to participate in the acquisition.
Nikkei notes that the proposal "aims to speed up decision-making at a company that has frequently butted heads with activist investors as it tries to turn itself around following a string of scandals and heavy losses over the past several years."
The private equity firm plans to launch the tender offer if it can get the green light from regulators. The Finance Ministry would need to screen the deal in advance, under legislation last year that imposes tougher scrutiny on foreign investment in companies involved in sensitive fields such as nuclear technology.
Toshiba continues to grapple with the fallout of a financial crisis several years ago stemming from accounting fraud and billions of dollars of losses surrounding a U.S. nuclear subsidiary.
In 2017, faced with the prospect of delisting from the Tokyo Stock Exchange after two years of negative net worth, the company raised 600 billion yen in a capital increase that activist investors flocked to. It has continued to clash with them since.
CVC will discuss the terms with Toshiba's management team, which will consider whether the proposal would benefit its shareholders before making a decision.
While Toshiba ADR spiked more than 20%, rising to the highest level since March 2015, Applied Materials shares slumped during the company’s analyst day event, sliding as much as 3.7%. Other peers in the semiconductor capital equipment space also fell, with Lam Research down 1.8% and KLA Corp. down 2.8%.