Bain steps up pursuit of Toshiba, gaining support of biggest investor

Bain Capital has secured the backing of Toshiba’s largest shareholder and has started talks with other investors as the US takeover firm plots a deal to privatize the 140-year-old Japanese industrial conglomerate.

The private equity firm is expected to be able to make a formal proposal Toshiba “Relatively soon,” say people close to the situation, and has received hints of support for a possible deal from the company’s top echelons.

The crucial backing of Bain from Toshiba’s largest shareholder, Effissimo Capital Management, puts significant pressure on the Japanese company to actively solicit takeover bids from private-equity-led syndicates and find a way out of an increasingly strained relationship with shareholders.

In a regulatory filing on Thursday, Singapore-based fund Effissimo said it has agreed to sell its 9.9 percent stake in Toshiba if Bain makes an offer that wins regulatory approval.

The fact that Bain’s offer would not catch Toshiba’s executives and board members off guard, people close to it said, contrasted with a surprise tentative crackdown by rival private equity firm CVC last April that eventually led to the resignation of then-CEO Nobuaki Kurumatani .

Bain has spoken to other major shareholders about their likely reaction to an offer and has started talks with Japanese investors who would be part of a buyout consortium and help allay regulatory concerns about Toshiba becoming fully foreign-owned.

Aside from its status as a symbol of Japan’s industrial power – Toshiba has a market capitalization of US$16.5 billion – Toshiba’s businesses span sensitive areas including nuclear power, defense and semiconductors.

Bankers and lawyers have said that a full-fledged takeover of Toshiba by an all-foreign consortium would likely be impossible given the restrictions of Japan’s recently revised Foreign Exchange and Foreign Trade Law (Fefta).

The agreement reached between Bain and Effissimo prevents the latter from selling its stake to other potential bidders, creating significant hurdles for KKR, Blackstone and other PE firms that have been exploring buyout deals with Toshiba.

Last week, in a rare showdown and historic moment for Japanese companies, Toshiba’s investors turned it down Company proposal to split into two partsbut also rejected a plan by a major shareholder who asked the Japanese group to resume talks about a possible takeover.

Despite the result, Toshiba leaders took the vote as a clear warning that by not opening up to talks with potential applicants, the company risked permanent standstill and long-term damage to its competitiveness, people familiar with the matter said.

In a statement, Bain said nothing has been decided on a bid for Toshiba, adding that “we recognize that there are many challenges to be resolved.” The group will hold talks with Toshiba management, the Japanese government, banks and other stakeholders, she added.

Toshiba said it was not involved in the agreement between Effissimo and Bain, but added that it would “make every effort to build trust with shareholders and reconsider its strategic options to continually increase shareholder value.”

Effissimo said it has made the necessary disclosures and “while we intend to share our thoughts on the matter in due course, we kindly ask for your patience at this time”.

Bain steps up pursuit of Toshiba, gaining support of biggest investor Source link Bain steps up pursuit of Toshiba, gaining support of biggest investor

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