A private equity firm’s approach for a Japanese icon looks absurdly ambitious. But Toshiba may be easier to acquire than many imagine.

A possible $20 billion-plus buyout bid for Toshiba Corp. looks at first glance like another example of private equity over-reaching itself in the scramble to spend its abundant capital. Everyone knows that bids for Japanese corporate icons are hard, especially when the buyer is foreign. But common wisdom isn’t always right, and CVC Capital Partners has timed its approach for the industrial conglomerate cleverly.

One question is whether a deal would be just too big. That looks unlikely. The buyout industry has staged deals of a comparable size in recent history — think of the $19 billion deal for ThyssenKrupp AG’s elevator division just before the pandemic was declared last year. CVC’s fifth Asia-Pacific fund, the likely sponsor of this transaction, raised $4.5 billion in 2020. Assume concentration limits restrict 15-20% of this to any one investment and a deal would need consortium partners to write the equity check. But private equity is used to club deals. All told, this is doable.

That leaves the question of whether Toshiba is too sensitive an asset to be acquired. This is harder to gauge. An outright block is, however, far from a foregone conclusion. A Japanese consortium partner might help assuage security concerns about foreign ownership of Toshiba’s technology.

Read more/Source: Bloomberg