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US private equity group KKR has approached Blackstone to prepare a joint bid for Toshiba, setting the stage for a showdown with Bain Capital.
According to people with direct knowledge of the discussions, the two groups held preliminary talks in recent weeks after Toshiba said it would set up a special committee to assess potential bids from private equity and other investors.
The buyout is expected to be led by KKR, although the talks are still in early stages and no formal decision has been reached, they added.
The interest from KKR and Blackstone comes after Bain in April secured qualified support for a buyout deal from Toshiba’s largest shareholder, Singaporean investment fund Effissimo.
KKR and Blackstone declined to comment on the talks, which were first reported by Bloomberg.
A take-private agreement for Toshiba, which has a market value of $18bn, would mark a watershed for private equity’s advance into Asia’s largest advanced economy.
Still, it remained uncertain how private equity groups plan to structure the deal in light of the significant political hurdles to take private a 146-year-old brand, whose businesses stretch across sensitive areas including nuclear power, defence and semiconductors.
Bankers and lawyers have said it is unlikely that Japanese authorities would approve a full takeover of Toshiba by an all-foreign consortium and are likely to require the participation of state-backed investment funds or other Japanese partners.
Toshiba executives have traditionally resisted taking the group private, but the company has been forced to explore the option to resolve years of financial turmoil and clashes with activist shareholders who own significant stakes in the Japanese group.
Many of the largest private equity groups have long considered Japan a hot target rich with technology, industrial and manufacturing expertise. A number of large firms such as Bain Capital have earned some of their best returns from the region.
Some global buyout funds have focused on large asset sales by company founders and businesses spun off by Japanese conglomerates under pressure from shareholders to raise their value.
But pulling off large deals even by seasoned investors such as Bain and KKR remains a delicate task that requires years of effort and relationship building.
“There is significant opportunity ahead for the de-conglomeration of Japan and in backing founder-led companies,” said one private equity executive recently, who cautioned: “It is not an easy market. Many more people have failed than have succeeded.”
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