Toshiba shareholders accuse conglomerate of ignoring privatization offers

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Several of Toshiba’s biggest shareholders accuse the Japanese conglomerate of failing to fully pursue negotiations with private equity buyers and say they will step up pressure on the board of directors to restart talks on a full buyout of the company. company.

Investors said that despite Toshiba’s claim that it had not received convincing indications of a takeover, they believed at least two private equity buyers had discussed at least valuations. 25% above the company’s current price of 4,743 ($ 42) per share.

To gauge their concerns, shareholders who collectively own more than 30 percent of Toshiba’s shares, told the Financial Times that as it stands, they plan to vote against a proposal tabled in November that would shatter the industry. 140 years old. giant into three separately listed companies rather than pursue full privatization.

Several executives said they suspected holders of at least 15 percent of Toshiba’s shares would follow suit when voting on the proposal early next year.

In addition to concerns that the three-way split deprived investors of the opportunity to consider a privatization offer, one of the largest shareholders said it was a poor alternative given the magnitude of governance issues in Toshiba’s many problems in recent years.

“Carrying out a three-way split without an appropriate governance structure in place will lead to worsening governance problems,” said an official of a large shareholder.

The split proposal arose out of a months-long strategic review that Toshiba’s second-largest shareholder, 3D Investment Partners, said in a letter to the company had come to “a premature conclusion to an inadequate process.”

At least two funds among Toshiba’s 20 biggest holders have told the Financial Times they are also considering more immediate tactics, which could include calling an emergency meeting of shareholders to vote on a purge of the board. administration.

“We are still awaiting key information regarding the company’s attempt to solicit private equity buyers and get a realistic price on the table. If the company doesn’t hear us asking for this, an EGM is definitely an option, ”said an official of a large shareholder.

The intensified shareholder unrest follows the publication last month of what several funds described to the FT as a “misleading” statement by a strategic review committee convened to examine the long-term future of the company and recommend actions to the board.

The committee said in November that although it had engaged with six private equity firms – including KKR, Bain, CVC and Blackstone – to discuss a full privatization, the price point the funds are considering repurchase was “not convincing compared to market expectations”. .

But several of Toshiba’s biggest investors said that after conducting their own research, they had good reason to question the validity of both the SRC process, which did not represent a formal auction, as well. that of its result.

In particular, a large group of investors believe that at least two private equity firms had indicated to the SRC that a buyout could theoretically value Toshiba at over 6,000 per share, or a premium of around 20% over the company’s share price during discussions. .

Toshiba could not be reached immediately for comment. On Friday, a spokesperson for Toshiba said the company “will continue to provide sincere explanations to our shareholders.” The company also referred to its earlier statement on SRC, which it noted the board had approved “unanimously.”

Over the past two weeks, investors have been contacted by Makinson Cowell, an outside investor relations adviser who previously conducted an investigation on behalf of Toshiba in July. Investors said they left researchers in no doubt about their doubts about the CBC process.

They added that, despite Toshiba’s statements of commitment to greater transparency, they cited as a further concern that the results of Makinson Cowell’s latest investigation would not be shared with investors, a policy confirmed by a spokesperson for Toshiba.

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