NTT Launches $16.5B Buyout of AI Arm in Streamlining PushNTT Launches $16.5B Buyout of AI Arm in Streamlining Push

(Bloomberg) -- Nippon Telegraph and Telephone Corporation plans to take over NTT Data Group Corporation in a deal worth ¥2.37 trillion ($16.5 billion), broadening its AI ambitions while heeding regulators’ calls for Japanese conglomerates to streamline unwieldy structures.

The country’s biggest telecom operator is offering ¥4,000 per share for all the stock it doesn’t own in NTT Data – a 34% premium to its previous close. The tender will take place from May 9 to June 19, with NTT Data to delist thereafter if the deal goes ahead. Its shares surged their daily limit of 17% in Tokyo to their highest in 25 years, while stock in parent NTT slid 2.1%.

A takeover of NTT Data – one of the world’s largest data center operators – would put artificial intelligence at the core of the group and give other units in the wide-ranging conglomerate additional reach overseas. About one-third owned by the government, NTT competes with KDDI Corporation and SoftBank Corporation in the growing AI arena, at a time Tokyo is pushing companies to develop a homegrown AI platform to vie with the likes of OpenAI and China’s DeepSeek.

“You sometimes need to make bold investments to win against the competition,” NTT Data CEO Yutaka Sasaki told a news conference. Becoming a wholly-owned subsidiary gives it the financial scale to chase bigger deals, he said. “We will speed up our decision-making to do large-scale M&A and build data centers.”

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Government control has been both boon and a curse for NTT, giving it the stability to explore and develop new technologies but robbing it of agility. That’s even as it sits on assets worth around $210 billion, of which cash and cash equivalents comprise more than $8 billion. Standard & Poor’s said it may cut its credit rating on the telecom group and that it expects the debt burden of the acquisition to outweigh any positive effects.

The take-private deal coincides with shareholder protests about the murky relationships between the listed units of some of Japan’s biggest conglomerates.

The Tokyo Stock Exchange in February cautioned companies with parent-affiliate listings to take measures to protect minority shareholders’ interests, an escalation in a longstanding campaign by the bourse to reduce the number of such structures.

Since then, NEC Corp. has acquired unit NEC Networks & System Integration Corporation, while Bloomberg News reported Toyota Motor Corporation Chairman Akio Toyoda’s plan to buy Toyota Industries Corporation. That’s fueling speculation that more companies may move to acquire listed subsidiaries. NTT previously acquired its cash-generating wireless carrier NTT Docomo in 2020.

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NTT Data, which has a strategic partnership with OpenAI, provides AI services and consulting to global customers, including US municipalities and federal agencies. 

The data consulting and networks unit holds the IT service knowhow needed to expand the photonics-based next-generation IOWN network service that NTT plans to roll out globally, according to Tomoaki Kawasaki, senior analyst at Iwai Cosmo Securities.

“Fully integrating NTT Data into the parent company is likely a move to advance NTT’s growth strategy,” he said. “There’s probably some governance-related motivation as well.”

NTT Data announced its OpenAI collaboration for enterprise AI tools shortly after SoftBank Group Corporation CEO Masayoshi Son stood on stage with OpenAI founder Sam Altman to unveil a similar tie-up.

NTT has poured billions of dollars into AI research, investing heavily in photonic chips, with a focus on energy-efficient technologies for a resource-poor country. It has its own large language model, dubbed “tsuzumi”, that touts low energy consumption.

“We are a big ship of 340,000 employees, and it takes some time to turn this ship around,” NTT CEO Akira Shimada said. “But we’ve now built the consensus to move forward.”

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