The second-biggest investor in Japan’s Toshiba Corp on Thursday required a extraordinary regular gathering, trying to constrain the organization to win 66% help for a three-way separation plan that has infuriated a few significant overseas shareholders. The proposition by Singapore-based hedge fund 3D Investment Partners denotes the most recent in a long and acrimonious fight between the once-strong tech aggregate and some of its foreign shareholders, a significant number of them activist funds.
The break-up plan was announced last November after a five-month strategic review following years of accounting scandals and governance issues that undermined investor confidence and saw Toshiba’s market value more than halved, to around $18 billion, from an early 2000s peak.
Toshiba is now about 30%-owned by foreign hedge funds, many of which doubt whether management’s plan to split the company into three businesses – one each for energy/infrastructure, electronic devices and flash memory chips – can maximise shareholder value.
If 3D’s proposal for the meeting were to be accepted, it would trigger a vote that could ultimately scupper the break-up plan, a strategy that carries echoes of a similar move announced last year by General Electric Co.
“There is no rationale for pursuing at great expense the separation plan without knowing whether a sufficient number of Toshiba shareholders will ultimately provide consent,” the fund said. Toshiba has previously said the plan will cost 10 billion yen ($86 million) to implement.
3D owns more than 7% of Toshiba, a stake worth well over a billion dollars. In a statement, it highlighted concerns about the cost of going ahead with the split before getting a mandate from shareholders, and called for Toshiba to resume its strategic review.
Toshiba said on Thursday it has received the proposal from 3D and is currently examining it. Shares in Toshiba were almost flat on Thursday morning, compared with a 2.1% decline in the Tokyo market.
In a twist, 3D said that if an extraordinary general meeting were to be approved, it would actually vote against its own proposal that Toshiba’s statutes of incorporation should be changed to mandate the two-thirds voting support is needed for the “strategic reorganisation plan”. Instead, 3D said, the company should not approve any reorganisation “without first further exploring other alternatives thoroughly”.
With its proposals, 3D is effectively trying to force the conglomerate to bring forward by more than a year a vote requiring backing from two-thirds of shareholders that is required under Japanese law. Officially, the vote is not slated to be held until the annual general shareholder meeting in 2023. Weakened by a 2015 accounting scandal and the bankruptcy of its US nuclear business, Toshiba has proposed the break-up to sharpen its focus on individual businesses.
But 3D and other shareholders have pushed for a more thorough review that would take into account potential private-equity bids. Toshiba’s strategic review so far “failed to consider a full range of alternatives,” 3D said.
One alternative to seeking a direct vote on support for the breakup plan that has been floated among Toshiba’s board is asking shareholders at the extraordinary meeting to instead vote on the reappointment of its board directors, people familiar with the matter have said.
But details of the meeting are unclear, including the level of shareholder support it will require to continue with the plan. The company itself has proposed an extraordinary shareholder meeting in the January-March quarter to gauge shareholder support for the break-up plan, set to be completed by March 2024.
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