Toshiba Investor King Street Plans to Nominate New Directors

(Bloomberg) -- Toshiba Corp. investor King Street Capital Management plans to nominate a slate of independent directors to replace a majority of the Japanese manufacturer’s board, ratcheting up the hedge fund’s first public activist campaign.

Among the nominees will be Brian Higgins, co-founder of the fund, which manages about $20 billion. King Street owns about 5.4 percent of Toshiba and is its fourth-largest shareholder. The stock rose as much as 2.5 percent in Tokyo on Tuesday.

In a letter to Chief Executive Officer Nobuaki Kurumatani dated Monday, New York-based King Street said Toshiba needs new independent directors to "fully maximize its industrial strengths and empower the innovative potential of its employees.” It added that the board "must provide a renewed sense of urgency, assertive decision-making and a profitable growth mindset to unlock Toshiba’s value."

“The structuring of the board and candidate selection has been done appropriately,” Toshiba said in an e-mailed response. The company said it plans to respond flexibly to changes in the environment to ensure it can deliver shareholder value.

In October, King Street urged the company to buy back at least 1.1 trillion yen ($9.9 billion) of shares as quickly as possible. King Street also released a 100-plus page presentation outlining ways the company could increase its profit margins in the next 12 to 24 months.

Toshiba has been raising capital and selling assets to restore its finances and profitability following an accounting scandal and losses tied to its nuclear-power business. Hong Kong-based Argyle Street Management previously criticized the Tokyo-based company over the 2 trillion yen sale of the memory unit to a group led by Bain Capital, saying it was undervalued.

Previously: Toshiba Investor Argyle Urges Buyback, Seeks Restraint on M&A

Toshiba agreed in June to a 700 billion-yen buyback, an amount King Street said was too small, given that the conglomerate is sitting on about 1.8 trillion yen in cash.

King Street said it would drop its proposal if it can reach a resolution with management. Otherwise it plans to submit directors’ names in time for the annual meeting.

--With assistance from Melissa Karsh and Pavel Alpeyev.

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Alan Mirabella, Peter Elstrom

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