Toshiba’s No. 2 Shareholder Steps Up Fight Over Breakup Plan

(Bloomberg) -- 3D Investment Partners Pte, the second-largest investor in Toshiba Corp., called for a special meeting of the Japanese company’s shareholders on Thursday as it steps up opposition to a separation plan.

Singapore-based 3D is requesting a vote on Toshiba’s proposed split that must be supported by at least two-thirds of stockholders, it said in a statement, confirming an earlier Bloomberg News report. A second proposal from 3D, which holds a 7.6% stake in Toshiba, asks for the company to reconsider alternative options.

Toshiba announced in November that it intended to separate into three companies as a way to create value for shareholders after years of scandals and corporate governance issues. 3D published an open letter that month opposing the plan, saying Toshiba’s strategic review process was inadequate.

The investor is now calling for an extraordinary general meeting because it’s concerned about a lack of transparency in the separation process, including about how Toshiba intends to structure the shareholder vote and what level of support would be required for the process to proceed, people familiar with its plans said.

A representative for Toshiba said the company has received a letter from 3D and is reviewing it.

Investor Distrust

The first proposal is unusual in that it would require Toshiba to push ahead with the company split, or any other strategic reorganization supported by the board and its strategic review committee, if approved. The move aims to ensure that at least two-thirds of investors support the breakup, a threshold that would typically be needed for any major reorganization or sale of a Japanese company.  

3D plans to vote against its own proposal, it said. The investment firm believes a supermajority vote would give Toshiba a clear mandate for its plans if they’re approved, or force the company to scrap the split and launch a new review if it doesn’t gain enough acceptance.

The second proposal, which 3D will support, calls for the Toshiba board’s strategic review committee to launch a new review to ensure all avenues to unlock value are fully explored. 

Toshiba plans to complete the spinoffs of the infrastructure services business and the technology device unit by the second half of fiscal 2023, the company has said. 3D argued in its November letter that the strategic review process that led to the breakup plan was flawed and failed to address the company’s underlying issues. 

“There is no reason to believe the Reorganization will solve Toshiba’s long-standing problems,” 3D said. “Instead, it will merely create three ‘small Toshibas’ with similar problems.”

The investment firm has accused Toshiba of not adequately exploring a full range of alternatives, including a sale of all or part of the company. It has also argued that Toshiba prematurely cut off talks about selling a minority stake to a global private equity firm in favor of the breakup. 

Accounting Scandal 

The company has said it plans to hold a shareholder meeting by March to vote on the separation plan. Toshiba’s leadership has offered few details beyond that, including what date the vote will be held on.

3D’s push for its own meeting and proposals highlights the simmering tension and level of distrust between the Japanese icon and some of its largest investors. Toshiba has been mired in controversy since the emergence of an accounting scandal in 2015 that devastated its profits and led to a company-wide restructuring. 

The subsequent unraveling of a costly foray into the nuclear power business in the U.S. saw it teeter on the edge of delisting, forcing it to sell its crown-jewel memory unit and offer stock that was snapped up by activist investors. That in turn led to a proxy fight at a 2020 shareholder meeting, where company executives and high-level officials were found to have colluded to influence voting.

The Tokyo-based conglomerate said in November that its former Chief Executive Officer Nobuaki Kurumatani violated ethical standards when he and the management team worked against activist investors including Effissimo Capital Management Pte, which was trying to gain more control of the conglomerate at its 2020 annual shareholder meeting. Since then it has vowed to improve its governance and relationship with stockholders. 

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