Toshiba Board Set For Vote That Could Back Buyout Strategy

Two influential investor advisory firms have backed the approval of two new outside directors at Toshiba in a vote set to take place at the company’s annual general meeting on Tuesday.

Institutional Shareholder Services (ISS) and Glass Lewis have both recommended voting for the directors from Toshiba’s hedge fund investors Elliott Management and Farallon Capital Management, in a move that could bolster support for a potential buyout.

The 146-year-old Japanese conglomerate is looking for a way forward after years of mismanagement and accounting scandals, and the approval of the outside board members would be a sign that it has become more open to the possibility of being taken into private hands.

Shareholders rejected a board-backed restructuring plan in March.

Buyout offers

Toshiba nominated the new posts in order to mollify activist investors amidst conflict over its future strategy.

Reuters reported last week that bidders are considering offers of up to 7,000 yen ($51, £42) per share for the company, up to a 27 percent premium to Toshiba’s share price at the time of 5,501 yen.

The top end of the offer price, if finalised, would value Toshiba at up to 3 trillion yen, or about $22bn.

The company’s shares surged up to 6.5 percent following the report.

Asset disposal

The conditions reportedly attached to the offers and their wide range suggests some of Toshiba’s assets — such as its Kioxa memory chip unit — would need to be “carved out, or spun out”, wrote analyst Travis Lundy in a research note at the time, and “if spun out, that would mean a lower price for the rest of the basket”.

He added that the price could be lowered in a second round of bidding.

Bain Capital, Blackstone and CVC Capital Partners are among the funds reportedly considering bids in what could become the largest-ever private equity deal in Japan.

There are a total of eight bids on the table to take Toshiba private and two more capital alliances that would see it remain listed, the company said earlier this month.

Criticism

Bain led the consortium that took the Kioxa memory-chip unit private in 2018, with Toshiba retaining a 40 percent stake.

External Toshiba board member Mariko Watahiki, a former high court judge, has criticised the proposed appointments of the two new members, saying their presence would skew the board toward activist investors, but she is unlikely to accrue enough support to reject the nominations, Reuters reported, citing an unnamed source.