Unique-Main Toshiba shareholder objects to break-up, urges board to solicit gives By Reuters
© Reuters. FILE PHOTO: The Toshiba Corp. logo. can be seen next to a traffic light on a building in Tokyo, Japan, November 9, 2021. REUTERS / Issei Kato
From Makiko Yamazaki
TOKYO (Reuters) – Toshiba’s second largest shareholder (OTC 🙂 Corp on Wednesday objected to the Japanese conglomerate’s plan to split into three companies, asking it to seek offers from potential buyers instead.
Hedge fund 3D Investment Partners, which owns more than 7% of Toshiba, set out its objections in a three-page letter to the company’s board of directors, making it the first major shareholder to formally oppose the liquidation plan outlined earlier that month.
The letter, which Reuters looked at, underscores shareholders ‘unease with Toshiba’s proposal – an unease reflected in the company’s recent poor stock performance – and raises the possibility that the liquidation could face difficulties at a shareholders’ meeting early next year, to get approval.
A Toshiba spokesman said there was no comment on individual IPOs with shareholders. 3D declined to comment.
The proposed split becomes “extremely unlikely” to solve any of Toshiba’s current problems and “will instead create three underperforming companies like Toshiba today,” Singapore-based 3D said in the letter.
Some other hedge fund shareholders also told Reuters, on condition of anonymity, that they were disappointed that Toshiba had rejected the idea of privatization.
In its letter, 3D said Toshiba should “open a formal process, develop a compelling plan for each of the companies, provide detailed due diligence materials and management meetings to interested financial and strategic parties, encourage and enable stretch proposals from those parties and do the best.” evaluate”. Way forward “.
Toshiba launched its strategic review in response to pressure from investors following a governance scandal over alleged management collusion with Japan’s Ministry of Commerce to pressure foreign shareholders.
FIVE MONTH REVIEW
During the five-month review, Toshiba’s audit committee held discussions with six private equity firms, which sources included KKR & Co (NYSE 🙂 and Brookfield, and looked for strategic ideas, including privatization.
While the Audit Committee has never conducted an auction process with due diligence for a potential sale, it has said discussions with private equity firms indicated that potential offers “were not convincing relative to market expectations”.
The Audit Committee, which consists of five external board members, has announced that it has not received any honest proposals to make the company private. The idea of going private has raised concerns at Toshiba.
However, in its letter, which was also addressed to the Audit Committee, 3D criticized the committee for failing to submit proposals to sell Toshiba or divest some of its businesses in part.
“The (committee) appears to have compromised its review and relented excessively on the uninspired projection model of an adamant management team and dubious allegations of regulatory, employee morale and customer concerns about a different ownership structure.
Founded in 2015 by former Goldman Sachs (NYSE 🙂 banker Kanya Hasegawa, 3D was one of dozen foreign hedge funds to participate in a $ 5.4 billion capital injection into Toshiba during a bankruptcy crisis of its US nuclear power plant in 2017.
Toshiba plans to complete the overhaul by March 2024.
Toshiba was founded in 1875 and plans to house its energy and infrastructure departments in one company while its hard drive and power semiconductor businesses form the backbone of another. A third will manage Toshiba’s stake in the flash memory chip company Kioxia Holdings and other assets.
Toshiba’s shares have fallen more than 4% since the business paper first announced the plan on November 8th.
The stock fell 1.2% to 4,688 yen, compared to a 0.7% decline in the benchmark Nikkei index early Wednesday.