Toshiba has held an emergency board meeting and called on Goldman Sachs for help as the Japanese technology conglomerate battles with an unprecedented shareholder revolt on two fronts.
The company, which has tried several strategies to revive its business, faces two demands for extraordinary general shareholder meetings. Toshiba was accused by investors of deploying “dark arts” to survive a knife-edge shareholder vote in July.
Demand for EGMs, viewed by investors as a last resort, remain extremely rare in Japan despite increasing shareholder activism that has helped boost the Tokyo stock market. The appeals take Toshiba into uncharted territory and put exceptional pressure on Nobuaki Kurumatani, chief executive.
Toshiba has said it is studying both EGM requests and people close to the company believe that it is looking for ways to combine both demands into a single meeting.
At the hastily-convened conference on Monday ahead of the new year, Toshiba’s board agreed to grant Mr Kurumatani and other senior executives powers to set the official “date of record”. That determines which shareholders are eligible to vote based on when they bought stakes and marks the first step in the process of holding an EGM.
$17bn
Toshiba’s impairment losses on M&A over last two decades
Shares in Toshiba rose as much as 2.1 per cent on Tuesday. That coincided with the Nikkei 225 index, of which Toshiba is not a constituent, rising 2.8 per cent to break through the 27,500-point threshold and hit its highest level since April 1990.
The first EGM demand came on December 17 from the secretive Singapore-based fund Effissimo, which is Toshiba’s largest shareholder, with a 9.9 per cent stake.
The fund has called on the company to appoint an independent committee to investigate whether the July AGM was conducted fairly. That request followed a report by the Financial Times that certain investors felt pressured into withholding their votes as Toshiba and its advisers mounted an aggressive campaign to keep Mr Kurumatani’s shareholder approval rating over 50 per cent. Sumitomo Mitsui Trust, Japan’s largest shareholder services company, subsequently admitted that a large slab of votes had gone uncounted.
The Effissimo EGM request caused panic within Toshiba, according to people close to the company, and prompted management to ask Goldman Sachs to reprise its role as adviser on defence against shareholder activism. Goldman has not decided whether to formally take on the role, the people said. The bank declined to comment publicly on the matter.
Farallon Capital, another top Toshiba shareholder and one of the world’s largest hedge funds, added to the Japanese company’s woes with its own demand for an EGM on December 25.
Farallon has called on Toshiba management to explain what it believes is a sudden and poorly-justified change in its investment strategy. Toshiba announced in November that it planned to use its capital for “proactive investments on resources”, but Farallon said this policy was at odds with its previous plan of organic expansion and “programmatic M&A”, which it interpreted as smaller, bolt-on acquisitions.
Farallon also questioned Toshiba’s record of big transactions, noting that it had recorded about ¥1.8tn ($17bn) in impairment losses over the last two decades “resulting from heedless growth investments through large-scale M&A, which have led to a reduction of shareholder capital and a crisis of solvency”.
Another investor in Toshiba shared Farallon’s concern about the group’s reported ¥1tn investment plan for renewable energy, saying the company risked repeating its past failures in M&A. Toshiba has said that it has yet to decide on a concrete investment plan at the ¥1tn level.
