CVC Weighs Cutting Contribution to JIP-Led Toshiba Bid

(Bloomberg) -- CVC Capital Partners is in talks to reduce its planned contribution to a Japan Industrial Partners Inc.-led buyout offer for Toshiba Corp. to help ease antitrust approval for the deal, according to people familiar with the matter.

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The buyout firm aims to avoid triggering Chinese regulatory scrutiny, which could delay the deal, by lowering the amount of its investment and the size of its stake in the Japanese conglomerate, said the people, who asked not to be identified as the information is private.

Deliberations are ongoing and no final decision has been made, the people said. Representatives for CVC and JIP declined to comment.

Shares of Toshiba fell as much as 3.3% and touched the lowest intraday level in more than two weeks on Thursday after the Bloomberg News report. The stock dropped 1.7% at the close, giving the company a market value of about $15.2 billion.

A merger transaction -- even if no Chinese companies are involved -- is subject to regulatory approval in China should the deal have the potential to affect competition in the local market. A non-China transaction could face antitrust review if the companies reach certain revenue thresholds and the deal involve a change of control. Any three companies that have 75% combined market shares and where each of them has 10% or above are seen as having major influence in the industry.

China Approval

Chinese regulators had in the past given the key nods in several major cross-border deals including SK Hynix Inc.’s $9 billion acquisition of Intel Corp’s Nand storage unit. The State Administration for Market Regulation last year granted approval for the transaction, which was the final hurdle to the Korean company’s largest-ever purchase. However, China has also ended deals before they could be completed. A $44 billion merger between Qualcomm Inc. and NXP Semiconductors NV was scrapped in 2018 because Beijing didn’t approve the deal before a final deadline.

The JIP-led consortium, which is the preferred bidder, is considering a takeover of Toshiba at a valuation of about 2.4 trillion yen ($16.4 billion) in what could be Asia’s biggest buyout this year, Bloomberg News reported this week. The group plans to fund the bid with 1 trillion yen in cash and 1.4 trillion yen of financing support from banks, people familiar with the matter have said.

The JIP-led bidding group and a rival consortium led by state-backed investment fund Japan Investment Corp. are running into obstacles securing financing commitments from banks, threatening to delay the potential takeover, Bloomberg News reported this month.

(Adds background on previous antitrust approvals on major deals by China in sixth paragraph.)

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