Private equity circles Kobayashi Pharmaceutical with a buyout topping ¥500 billion

A buyout in the works

Two buyout firms, CVC Capital Partners and Nippon Sangyo Suishin Kiko Ltd., are evaluating a proposal to take Kobayashi private at a price tag north of ¥500 billion, roughly $3.2 billion. People familiar with the talks say the founding family may participate, and both the company and family have hired bankers and advisers to assess the potential deal.

If an offer lands, investors should expect a premium, though the size is still up in the air. Kobayashi's shares are still about 13% below where they were before the 2024 scandal, and its market capitalization sat near ¥460 billion at Thursday's Tokyo close. CVC and NSSK were not immediately available to comment, and Kobayashi declined to comment.

The red yeast fallout

Early in 2024, the company began receiving illness reports tied to nutritional pills containing red yeast, a pigment used in red rice wine and dishes like Peking duck. Because red yeast produces statins that can lower cholesterol, it is also marketed as a supplement.

Kobayashi recalled the supplements after some were found to contain puberulic acid, widely regarded as a poisonous substance. The episode sparked hundreds of reports that referenced deaths. Kobayashi says its investigation has not verified any fatalities as being attributable to the supplements themselves. In a separate update, health authorities said a small number of deaths were associated with suspected exposure to tainted products and with kidney damage.

The company recorded a ¥12.7 billion expense tied to the recalls and scandal, and over 500 individuals were determined to qualify for health-damage compensation. Akihiro Kobayashi, a founding family member with an 11.9% stake, resigned as president.

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Governance pressure and the plan forward

Oasis Management, based in Hong Kong, is the largest shareholder with 14.4%, per Bloomberg data. The company holds 4.8% of its own shares. Since the scandal unfolded, Oasis has pushed for governance changes through shareholder proposals and litigation, and ahead of the 2025 annual meeting argued that management had not sufficiently dialed back the founding family's influence.

In February, Kobayashi set restoring trust as the centerpiece of a medium term plan. It targets ¥30 billion of R&D over three years, including tighter quality controls. Management is also wrestling with higher raw material costs and shifts in distribution, including consolidation among drugstore chains.

The plan calls for no less than ¥30 billion to be returned to shareholders over three years, alongside ongoing dividend hikes. Going private could let Kobayashi shift some of that return budget toward rebuilding quality controls and funding growth.

If a take private proceeds, Kobayashi would join a broader wave of Japanese privatizations driven by managements seeking relief from public shareholder and activist pressure. Other pharmaceutical firms, including Hisamitsu Pharmaceutical Co., known for Salonpas patches, and Taisho Pharmaceutical Holdings, have in recent years taken steps toward privatization.

What it means for your money

Keep an eye on Oasis. With 14.4% and a track record of pressing for change, its stance could shape the path and the premium. A privatization could shift more funds to quality improvements and growth initiatives, which might reduce near-term payouts while addressing the infrastructure behind products spanning eye drops and skin creams through to air fresheners and cotton balls. It also gives the company room to revamp quality checks and handle higher raw material costs.

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