Monday, July 15, 2024

Toshiba holds emergency board meeting as pressure from activists mounts

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Toshiba held an emergency board meeting and called on Goldman Sachs for help as the Japanese tech conglomerate battles an unprecedented shareholder revolt on two fronts.

The company, which has tried several strategies to revive its activity, faces two requests for extraordinary general meetings. Toshiba has been accused by investors of deploying “Dark arts” to survive a rock-solid shareholder vote in July.

Demand for AGMs, viewed by investors as a last resort, remains extremely rare in Japan despite the growing shareholder activism that has helped boost the Tokyo stock market. The appeals are taking Toshiba into uncharted territory and exerting exceptional pressure on General Manager Nobuaki Kurumatani.

Toshiba said it was considering both EGM’s requests and that people close to the company believed it was looking for ways to combine the two requests into one meeting.

At the hastily convened conference Monday ahead of the New Year, Toshiba’s board of directors agreed to grant Mr. Kurumatani and other senior executives the powers to set an official “registration date.” This determines which shareholders are eligible to vote based on when they purchased stakes and marks the first step in the process of holding an EGM.

$ 17 billion

Toshiba’s M&A Impairment Losses Over the Past Two Decades

Toshiba shares rose 2.1% on Tuesday. This coincided with the Nikkei 225 index, of which Toshiba is not a constituent, up 2.8% to cross the threshold of 27,500 points and reach its highest level since April 1990.

The first EGM request came on Dec. 17 from the Singapore-based secret fund Effissimo, which is Toshiba’s largest shareholder, with a 9.9% stake.

The fund asked the company to appoint an independent committee to check whether the July general meeting was held fairly. The request followed a Financial Times report that some investors felt pressured to refuse their votes as Toshiba and his advisers mounted an aggressive campaign to keep Mr. Kurumatani’s shareholder approval rating above 50%. Sumitomo Mitsui Trust, Japan’s largest shareholder services company, later admitted that a large tranche of the votes had not been counted.

The request for Effissimo EGM has caused panic within Toshiba, according to those close to the company, and prompted management to ask Goldman Sachs to resume its role as adviser on defense against shareholder activism. Goldman has not decided to officially take on the role, the people said. The bank declined to comment publicly on the matter.

Farallon Capital, another prominent Toshiba shareholder and one of the largest hedge funds in the world, added to the Japanese company’s woes with its own EGM request on December 25.

Farallon has asked Toshiba’s management to explain what they see as a sudden and ill-justified change in their investment strategy. Toshiba announced in November that it planned to use its capital for “proactive resource investments”, but Farallon said the policy was at odds with its previous plan for organic expansion and “programmatic mergers and acquisitions.” , which he interpreted as smaller and more focused acquisitions. .

Farallon also questioned Toshiba’s record of large transactions, noting that it had recorded about 1.8 billion yen ($ 17 billion) in impairment losses over the past two decades “resulting from investments. reckless growth through large-scale mergers and acquisitions, which led to capital reduction and a solvency crisis ”.

Another Toshiba investor shared Farallon’s concern over the group’s announced 1 billion yen investment plan in renewable energy energy, saying the company risked repeating past failures in mergers and acquisitions. Toshiba said it has yet to decide on a concrete investment plan at the 1 billion yen level.


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