The top shareholder in Toshiba, as well as an influential proxy advisory firm, have signalled their opposition to the breakup of the veteran Japanese conglomerate.

Reuters reported that top shareholder Effissimo Capital Management and proxy advisory firm Institutional Shareholder Services (ISS) have joined a growing list of investors who oppose the dismantling of the 146-year-old conglomerate.

It was back in November last year that Toshiba revealed plans to break itself up into three separate companies, in response to years of scandals.

Toshiba breakup

The project, which Toshiba hoped to complete by March 2024, would result in the creation of one unit focused on infrastructure and another unit focused on electronic devices such as power semiconductors.

The third unit, which would retain the Toshiba name, would manage Toshiba’s stake in memory chip maker Kioxa Holdings and other assets.

At the time industry watchers were divided over the benefits of a breakup, with Fumio Matsumoto, chief strategist at Okasan Securities, saying last November it would create “three lacklustre midsize companies”.

However Rakuten Securities strategist Masayuki Kubota said the move would allow the 146-year-old conglomerate to rebuild its governance.

Breakup opposition

Now Reuters has reported that the opposition to the breakup continues to grow, and marks the latest development in a long battle between the tech company and a number of its foreign shareholders, as it seeks to shake off years of accounting scandals and governance issues.

Toshiba will reportedly hold an extraordinary shareholders’ meeting on 24 March to put its plan to split up to a vote.

Singapore-based Effissimo Capital Management owns a stake of roughly 10 percent in Toshiba, said in a statement it has decided to vote against the plan.

Effissimo Capital Management reportedly called on Toshiba to establish a trustworthy leadership team first, saying the current management and board are not capable of crafting “a strategic plan with such irreversible and profound consequences.”

The plan, “may ultimately damage Toshiba’s medium- to long-term corporate value,” it said.

Separately, proxy advisory firm Institutional Shareholder Services (ISS) was quoted by Reuters as advising against the break-up plan in a report dated Thursday.

“Years of corporate governance turmoil…a split shareholder base, and an uninspiring management track record raise significant scepticism as to whether the current plan is superior to a privatisation proposal,” ISS was quoted as saying.

ISS also recommended shareholders vote against a proposal from the second-largest shareholder, Singapore-based 3D Investment Partners, that Toshiba explore other options and solicit buyout offers from private equity firms.

The proposal to direct the board towards more explicitly considering a sale of the company “appears overly prescriptive and premature given the three months remaining until the company’s annual shareholders meeting,” it reportedly said.

Troubled past

Toshiba said in a statement that it would continue to make every effort to explain its proposal to shareholders to gain their support.

The development comes after Toshiba earlier this month appointed an interim chief executive after shareholders voiced concerns that management had not appeared able to proceed with the company’s restructuring plan in a timely manner.

Toshiba was hit by a major accounting scandal in 2015 and faced delisting, a crisis that resulted in foreign-based shareholders owning more than half of the company, including activist shareholders such as Elliott Management, Third Point and Farallon.

In recent years Toshiba has sold off assets such as medical devices, personal computers, consumer electronics and its US nuclear power unit, Westinghouse Electric, which declared bankruptcy in 2017.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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