Japan’s Toho Holdings eyes KKR’s health device maker PHC for $1.3 billion

By Taro Fuse

Toho Holdings Co., a Japanese pharmaceutical wholesaler, is in talks to acquire KKR & Co.-led medical device maker PHC Holdings Corp. for more than ¥200 billion ($1.3 billion), according to people familiar with the matter. 

Tokyo-based Toho has submitted an initial proposal and is conducting due diligence, the people said, asking not to be identified because the discussions are private. While domestic investment funds have also shown interest in PHC, Toho is currently the only prospective buyer engaged in concrete discussions.

KKR is the largest shareholder in PHC, with a roughly 38% stake, according to data compiled by Bloomberg. Both firms have appointed financial advisers and have been seeking a buyer for the healthcare company in line with KKR’s plans to exit its investment.

Amid growing pressure from shareholders and activist investors, the healthcare industry in Japan is seeing a wave of management-led privatizations. Hisamitsu Pharmaceutical Co. — known for its Salonpas pain-relief patches — and Taisho Pharmaceutical Holdings Co. have moved to go private in recent years, while Kobayashi Pharmaceutical Co. is considering a private equity-led buyout. 

Shares of PHC have climbed 29% this year, giving it a market capitalization of ¥182 billion. The tender offer price is expected to include a premium and the total acquisition cost could exceed ¥200 billion, the people said. 

Representatives for Toho, KKR and PHC didn’t respond to requests for comment. 

US investment firm KKR acquired an 80% stake in PHC’s predecessor, Panasonic Healthcare, in 2014. The company went public in Tokyo in October 2021, and KKR has been selling down its stake to recoup its investment. If the acquisition of all shares is completed, PHC will be delisted.

PHC operates in three main areas: diabetes management, healthcare solutions, and diagnostics and life sciences. Toho is seeking to expand its business through partnerships and acquisitions in related fields such as medical devices, diagnostic reagents and healthcare information technology, according to its midterm management plan.

The drug wholesaler has been in a prolonged tussle with an activist investor. Since taking a stake in June 2024, 3D Investment Partners has urged Toho to improve profitability, reduce assets including cross-shareholdings, and boost investor returns.