Activist company

Toshiba’s largest shareholder opposes plans to split the company into two

Toshiba’s hopes of quickly ending its long battle with shareholders have suffered another setback after its biggest investor and a major proxy advisory firm both took a firm stand against a plan to split the company in two. .

Opposition from secretive Singapore-based fund Effissimo Capital Management, which owns 10.4% of Toshiba, and Institutional Shareholder Services emerged two weeks before a critical shareholder vote.

It also follows the sudden resignation last week of Toshiba’s chief executive and two other figures known to be strongly opposed to taking the company private, an alternative outcome backed by several of its major shareholders and some senior executives.

An extraordinary general meeting on March 24 will allow shareholders to vote on a management-backed plan that would split one of Japan’s most famous industrial names in two, splitting its device and semiconductor businesses and listing separately. The remaining business would include, among many other subsidiaries, its nuclear and infrastructure divisions.

In a press release, Effissimo said such a major overhaul could be risky. “Any error in judgment here would lead to irrevocable consequences,” the statement said, adding that Effissimo will vote against the plan.

He also questioned whether Toshiba had the management resources to pull off the split, and noted that the EGM was being held even before the new chief executive had received a vote of confidence from shareholders at a general meeting. annual.

At the same time, an ISS report also recommended investors vote against the plan. “Although the strategic reorganization is an improvement over the status quo, it is unclear, based on the information disclosed so far, whether the implementation risk compensates investors compared to other alternatives. “, wrote the head of ISS Japanese research, Takeyuki Ishida, in the report.

The plan for a two-way split emerged in February after the company dropped a more complex three-way split idea that many of the company’s top shareholders told the company they would vote against.

Since Toshiba shareholders include an unusually large number of activist funds for Japan, some of whom want the company taken private, there has been a long stalemate over the company’s path forward.

Along the way, shareholders won a series of groundbreaking victories over Toshiba’s management, forcing key executives to resign and the company to establish a strategic review committee to weigh options.

“We will continue to do everything we can to explain our proposal to shareholders to gain their support,” Toshiba said, in response to comments from Effissimo and ISS.