Shares in Toshiba Corp (6502.T) surged on Thursday following a report that a domestic investor-led group was looking at a $19 billion bid in a deal that could lead to foreign activist shareholders being bought out after years of tension.
A consortium led by private equity firm Japan Industrial Partners has been given preferred bidder status in the second round of bidding, two sources familiar with the matter . The bid figure of 2.8 trillion yen cited by the Kyodo news agency represents a premium of 26% to Wednesday's closing price.
Japan Industrial Partners has contacted multiple Japanese firms, sources have said.
Of these, Orix Corp (8591.T) plans to join the consortium, while Chubu Electric Power Co (9502.T) is also considering joining, said another source familiar with the matter.
Japan Industrial Partners declined to comment. An Orix spokesperson said the company has been in talks with Japan Industrial Partners, while Chubu Electric has declined to comment.
Bloomberg News reported that Baring Private Equity Asia and CVC Capital Partners are also considering joining the consortium. Baring and CVC declined to comment.
The fund has been involved in corporate carve-outs and spin-offs from Japanese conglomerates. It bought Olympus Corp's (7733.T) camera business last year and Sony Group's laptop computer business in 2014.
Toshiba shares were up 7% in afternoon trade, on track for their biggest one-day gain in more than a year. They have risen about 17% this year. "It looks like people bought into the idea that there won't be more bad news," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.
Once a storied conglomerate, Toshiba has been weakened by accounting and governance scandals. Attempts to turn itself around have been overshadowed in recent years by discord between management and its many activist shareholders.
The consortium will put up about 1 trillion yen in equity, with the rest likely to come from bank loans, Kyodo said, adding that financing talks were underway and the offer value could change, depending on future movements of Toshiba's stock price.
But one of the sources said the consortium is yet to narrow down details of the proposal, including valuation and financing.
It was not immediately clear how many bids Toshiba was seriously considering but the takeover contest is probably still an open race between Japan Industrial Partners and state-backed Japan Investment Corp, said Travis Lundy, a Quiddity Advisors analyst who publishes on the Smartkarma platform.
The two had previously joined forces to bid for Toshiba but have since gone their separate ways, sources have said.
Japan Investment Corp has since been in talks with private equity firm Bain Capital, one of several overseas funds that passed the first round of bidding, one of the sources said. Bain has declined to comment.
