Effissimo pledges to support Bain buyout of Toshiba
Bain Capital appears to be preparing a take-private bid for Toshiba Corporation, having secured the support of the company’s largest activist shareholder for a potential tender offer.
Effissimo Capital Management, which owns about 9.9% of Toshiba and last year instigated the removal of several senior executives following a corporate governance scandal, said in a filing that it would sell to Bain should the private equity firm submit an offer that receives regulatory approval.
The development comes after Toshiba shareholders once again defied board guidance at an extraordinary general meeting to vote against a proposal for a two-way spinoff that would see the company’s devices and semiconductor business become an independent entity. A proposal to re-examine other options, including a PE-backed privatisation, was also rejected.
Effissimo and fellow activist investor Farallon Capital Management had earlier expressed their opposition to a spinoff, arguing that it risked damaging Toshiba’s corporate value, would fail to restore the trust of shareholders, and that management resources were insufficient to execute effectively. Proxy advisors Institutional Shareholder Services (ISS) and Glass Lewis also opposed it.
Toshiba said that it was not involved in negotiations with Bain or Effissimo on the matter. Nevertheless, the company’s stock rose 6.45% on April 1 to close at JPY 4,950, a five-month high.
Based on Toshiba’s market capitalisation of JPY 2.14trn (USD 17.5bn), should Bain proceed with a take-private it would be the largest PE deal ever seen in Japan or in Asia. A Bain-led consortium currently holds the bragging rights, having carved out Toshiba Memory Corporation (TMC) – the company’s prized flash memory business – at a valuation of JPY 2trn in 2018.
Toshiba’s troubles date back to the bankruptcy of its Westinghouse nuclear power unit in 2017. This led to various disposals and a widely distributed share issue that allowed activist investors to build up significant positions.
CVC Capital Partners made a tentative USD 20bn offer in April 2021 and then stepped back, awaiting guidance as to whether privatisation was desirable. Shortly thereafter, shareholders approved an investigation into alleged misbehaviour at the company’s 2020 annual general meeting. The probe found evidence of government collusion to rig voting, and four senior executives were removed.
Toshiba posted JPY 3.05trn in sales for the 12 months ended March 2021, down from JPY 3.38trn in 2020 and JPY 4.04trn in 2017. Net income came to JPY 113.9bn compared to losses of JPY 114.6bn and JPY 965.7bn in 2020 and 2017, respectively.
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