Toshiba Investor King Street Urges $10 Billion Share Buyback

(Bloomberg) -- Toshiba Corp. investor King Street Capital Management is urging the Japanese manufacturer to buy back about $10 billion of its shares, ratcheting up the hedge fund’s first public activist campaign.

In a letter to Chief Executive Officer Nobuaki Kurumatani dated Wednesday, New York-based King Street said Toshiba should purchase at least 1.1 trillion yen ($9.7 billion) of shares as quickly as possible. The $20 billion 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.

“No investment alternatives come close to the exceptional returns achievable from the buyback,” King Street wrote in the letter. “Accordingly, as much excess capital as possible should be deployed to this end.”

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 says is too small, given that the conglomerate is sitting on about 1.8 trillion yen in cash. The company’s delay in implementing the plan could “significantly impair” shareholder returns, according to the hedge fund.

King Street proposed new independent directors at Toshiba in late August, the Wall Street Journal reported at the time. The U.S. fund recently raised its stake in Toshiba to 6.35 percent from 5.23 percent, according to a filing with Japan’s Finance Ministry, and is the company’s second-largest shareholder.

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, Josh Friedman, Mary Romano

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