Major Toshiba shareholder objects to break-up, urges board to solicit offers
24/11/2021 04:06
(Adds other 3D investments)
By Makiko Yamazaki
TOKYO, Nov 24 (Reuters) - Toshiba Corp's 6502.T
second-largest shareholder on Wednesday objected to the Japanese
conglomerate's plan to split itself into three companies and
called on it to instead solicit offers from potential buyers.
Hedge fund 3D Investment Partners, which owns more than 7%
of Toshiba, laid out its objections in a three-page letter to
the company's board, becoming the first major shareholder to
formally oppose the break-up plan https://www.reuters.com/technology/toshiba-set-announce-split-into-three-firms-shareholder-reaction-focus-2021-11-12
outlined this month.
The letter, seen by Reuters, highlights shareholder
discomfort over Toshiba's proposal - an unease reflected in the
company's recent weak stock performance - and raises the
possibility that the break-up may struggle to win approval at a
shareholder meeting early next year.
A Toshiba spokesperson said it does not comment on
individual exchanges with shareholders. 3D declined to comment.
The proposed break-up is "extremely unlikely" to resolve any
of Toshiba's current problems and "is instead very likely to
create three underperforming companies in the image of today's
Toshiba," Singapore-based 3D said in the letter.
Some other hedge fund shareholders have also told Reuters,
on condition of anonymity, that they were disappointed Toshiba
had turned down the idea of going private.
In its letter, 3D said Toshiba should "open a formal
process, develop a compelling plan for each of the businesses,
provide detailed diligence materials and management meetings to
interested financial and strategic parties, encourage and enable
stretch proposals from those parties and evaluate the best path
forward".
Toshiba launched its strategic review after pressure from
investors following a governance scandal https://www.reuters.com/world/asia-pacific/independent-probe-says-toshiba-agm-last-year-was-not-fairly-managed-2021-06-10
over management's alleged collusion with Japan's trade ministry
to pressure foreign shareholders.
FIVE-MONTH REVIEW
During the five-month review, Toshiba's review committee
held talks with six private equity firms, which sources said
included https://www.reuters.com/technology/exclusive-toshiba-talks-with-four-investment-firms-strategic-ideas-sources-2021-08-25
KKR & Co KKR.N and Brookfield BAMa.TO , seeking strategic
ideas including going private.
While the review committee never conducted an auction
process with due diligence for a possible sale, it has said
talks with private equity firms suggested potential offers were
"not compelling relative to market expectations".
The review committee, which consists of five external board
directors, has said it did not receive any bona fide proposals
to take the company private. The idea of going private, it has
said, raised concerns inside Toshiba.
However, in its letter - which was also addressed to the
review committee - 3D criticised the committee for what it said
was a failure to ask for proposals for the sale of Toshiba, or
the partial disposition of some of its businesses.
"Overly reliant upon an intransigent management team's
uninspired projection model and dubious claims of regulatory,
employee morale and customer concerns about a different
ownership structure, the (committee) appears to have compromised
its review and relented," the fund said.
3D, founded by former Goldman Sachs banker Kanya Hasegawa in
2015, was one of dozens foreign hedge funds that participated in
a $5.4 billion capital injection Toshiba received during a
crisis stemming from the bankruptcy of its U.S. nuclear power
unit in 2017.
In addition to Toshiba, 3D has stakes in a number of smaller
Japanese firms including IT company Fuji Soft Inc 9749.T ,
textile and technology firm Daiwabo Holdings Co Ltd 3107.T and
music publisher Avex Inc 7860.T , according to Refinitiv data
based on filings this year.
It also owns a stake U.S.-based biotech MediciNova Inc
MNOV.O , according to Refinitv.
Founded in 1875, Toshiba plans to house its energy and
infrastructure divisions in one company while its hard disk
drive and power semiconductor businesses will form the backbone
of another. A third will manage Toshiba's stake in flash-memory
chip company Kioxia Holdings and other assets.
Toshiba plans to complete the overhaul by March 2024.
Shares of Toshiba have dipped more than 4% since the plan
was first reported by the Nikkei business daily on Nov. 8.
The stock was down 2% at 4,652 yen versus a 1.4% decline in
the benchmark Nikkei index .N225 on Wednesday afternoon.
(Reporting by Makiko Yamazaki; Editing by David Dolan and
Christopher Cushing)
((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))