Bain Capital wins Toshiba bidding, eyes another mega-deal

June 21, 2017
As the first half of the year winds down, Bain Capital is busy flashing its billions. 

In one development, a consortium led by the Boston-based firm has emerged as the winning bidder for the memory chip division of Toshiba (TKO: 6502), with media outlets reporting a price of roughly 2 trillion yen (around $18 or $19 billion). Separately, Bain Capital portfolio company BMC Software is reportedly considering a take-private takeover of fellow software business CA (NASDAQ: CA). With CA sporting a market cap of nearly $15 billion, a deal would likely be the biggest tech LBO not involving Dell in nearly a decade. 

Toshiba chooses its target

Working in a group with governmental investors including the Innovation Network Corp of Japan and the Development Bank of Japan, Bain Capital beat out a number of competing bids for Toshiba's memory chip business, including an offer from US chipmaker Broadcom (NASDAQ: AVGO) and private equity firm Silver Lake. Bain Capital will contribute $7.7 billion to the deal, per reports, with half that financing coming from South Korean chipmaker SK Hynix. 

If the purchase goes through, it would be the largest for a North American PE firm in Japan since at least 2008, per the PitchBook Platform. The current record-holder in that regard is KKR's takeover of automotive company Calsonic Kansei, a deal completed in March believed to be worth more than $10 billion. Bain Capital has completed 11 investments in Japan since the start of 2008, third-most among its North American peers. 

Toshiba is selling the memory chip unit to offset losses driven by the March bankruptcy of Westinghouse Electric, its nuclear power subsidiary. Broadcom and Silver Lake reportedly offered 2.2 trillion yen for the business, but Toshiba is believed to have preferred the government connections offered by Bain Capital's consortium. Another unhappy customer: computer storage company Western Digital. The California-based business has previously taken issue with Toshiba's shopping of the memory unit, saying its in violation of a longstanding agreement between Toshiba and Western Digital.

Another mega-deal in the works?

Just as Bain Capital is nailing down a deal with Toshiba, reports of another possible deal emerged, with BMC's potential takeover of CA, a provider of systems software and other IT services. BMC has been owned by Bain Capital and Golden Gate Capital since the two firms acquired the business in a 2013 transaction valued at $6.9 billion.

Buyouts topping the $5 billion mark have been few and far between in recent quarters, according to PitchBook data, with figures falling after reaching eight such deals during 4Q 2015. Considering CA's market cap, an add-on of the business would surely add another name to that list—and could prove to be the largest buyout announced in the US so far this year.

Within the IT sector, though, the incidence of such mega-buyouts seems to be on the rise. Private equity investors completed five buyouts topping the $5 billion mark during 2016, per the PitchBook Platform, more than in any year since 2007. Two recent standouts: In 2013, Silver Lake and Michael Dell acquired Dell for about $25 billion, and last year Dell gobbled up EMC in a transaction believed to be worth some $67 billion.
 

PitchBook subscribers can learn more about North American PE activity in Japan, as well as recent mega-deals in the IT space.

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