Thursday, July 25, 2024

Toshiba Board Gains 2 Directors From Activist Hedge Funds, in Historic Shift

Toshiba shareholders voted in two board directors from activist hedge fund investors at its annual general meeting on Tuesday – an inclusion that is expected to add momentum to its exploration of potential buyout deals.

Nabeel Bhanji, a senior portfolio manager at Elliott Management, and Eijiro Imai, managing director at Farallon Capital Management were elected, as was Akihiro Watanabe, an executive from boutique US investment bank Houlihan Lokey, who becomes chairman of its board.

To date only a few large Japanese companies have brought activist shareholders onto their boards. The inclusion by Toshiba is particularly significant given its history of accounting and governance crises since 2015 and tensions with its large activist investor base.

“One of the major issues that we’ve had as a company is a lack of trust between our large shareholders and management, and this was an attempt to address that,” Raymond Zage, who chairs the nomination committee, told the meeting before the vote.

Farallon and Elliott together hold about 10 percent of Toshiba and activist shareholders are estimated to own roughly a quarter of the company’s stock.

Tensions with activist investors were particularly fraught last year when a shareholder-commissioned investigation concluded the company had colluded with Japan’s trade ministry – which sees Toshiba’s nuclear and defence technology as a strategic asset – to block overseas investors from gaining influence at its 2020 shareholder meeting.

Earlier this year, shareholders rejected management-backed plans to split the company in half, prompting Toshiba to restart a strategic review.

All in all, seven new board directors were appointed and six were reappointed on Tuesday.

The appointments of Bhanji and Imai were not without controversy with one board member publicly expressing concern that the board may become too skewed towards the input of activist investors.

Toshiba said this month it had received eight initial buyout proposals to go private as well as two proposals for capital alliances that would see it remain listed.

It plans to shortlist bidders soon so that selected suitors can start due diligence from July.

Jerry Black, who chairs the board’s committee in charge of the strategic review, told the AGM that going private “could possibly help” with a radical and speedy transformation of Toshiba, while stressing that the committee has no predetermined points of view.

Sources have told Reuters that at least one bidder is considering offering up to JPY 7,000 (roughly Rs.4,000) per share to take the company private, valuing a potential deal at up to $22 billion (1,73,100 crore).

KKR, Baring Private Equity Asia, Blackstone, Bain Capital, Brookfield Asset Management, MBK Partners, Apollo Global Management and CVC Capital Partners have submitted initial bids, according to sources with knowledge of the matter.

Some of them may form consortia for a bid, they added.

Shares in Toshiba turned positive on the news, trading 0.8 percent higher at JPY 5,750 (roughly Rs. 3,300) in early afternoon trade. That’s up 22 percent since the end of the year, giving it a market value of $18 billion (roughly Rs. 1,41,600 crore).

© Thomson Reuters 2022

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