Kobayashi Pharmaceutical, a Japanese health products company involved in a supplement contamination scandal, is reportedly considering a buyout offer valued at more than ¥500 billion ($3.2 billion) from private equity investors. Sources familiar with the negotiations, who requested anonymity due to the confidentiality of the talks, identified CVC Capital Partners and Nippon Sangyo Suishin Kiko (NSSK) as the potential acquirers. The company’s founding family may also participate in the deal.
On Friday, Kobayashi said it had received a preliminary, nonbinding joint proposal from affiliates of NSSK and CVC Capital Partners to take the company private, though no final decisions have been made. Kobayashi’s shares were not traded at the Tokyo market open but were expected to increase. The company’s stock has remained about 13% below pre-scandal levels since early 2024, making a buyout potentially attractive for investors. As of Thursday’s market close, Kobayashi’s market capitalization was approximately ¥460 billion, suggesting that any acquisition proposal would likely include a premium to current share prices, though the exact offer has yet to be determined.
If completed, the transaction would align with recent trends in Japan where several pharmaceutical firms have opted to go private to reduce shareholder pressure and activist interventions. Companies such as Hisamitsu Pharmaceutical and Taisho Pharmaceutical Holdings have undertaken similar moves in recent years.
Kobayashi’s largest shareholder is Hong Kong-based activist firm Oasis Management, which owns 14.4% of the company. Oasis has actively pushed for governance reforms following the supplement controversy, including shareholder proposals and litigation aimed at reducing the influence of the founding family. Kobayashi itself holds 4.8% of its shares, while Akihiro Kobayashi, a founding family member holding 11.9%, stepped down as president after the scandal broke.
The contamination issue centered on nutritional pills containing red yeast, an ingredient commonly used as a pigment and marketed as a health supplement due to its cholesterol-lowering properties. In 2024, reports emerged linking illnesses and suspected deaths to these supplements after some were found to contain puberulic acid, a typically poisonous substance. Although Kobayashi’s investigations have not conclusively tied any fatalities directly to the products, health authorities reported a small number of deaths potentially related to contaminated supplements and kidney damage.
The company incurred a ¥12.7 billion charge related to product recalls and compensation for over 500 individuals deemed eligible for health damage claims. Since the incident, Kobayashi has prioritized restoring public trust, unveiling a medium-term plan in February that includes ¥70 billion in research and development spending over three years, with a focus on strengthening quality controls. The plan also accounts for at least ¥30 billion in shareholder returns and ongoing dividend increases. Rising raw-material costs and changes in the retail landscape, including drugstore operator consolidation, have added to the company’s operational challenges.
By going private, Kobayashi may gain greater flexibility to reallocate funds from shareholder returns toward improving product safety and investing in growth initiatives. Both Kobayashi and the potential buyers declined to comment, and CVC Capital Partners and NSSK did not respond to requests for comment. Kobayashi and its founding family have engaged bankers and financial advisers to evaluate the possible buyout.