Toshiba shareholders have voted down the management’s plan to split the industrial conglomerate in two, handing a fresh defeat to a company that has been at loggerheads with investors for four years.
The pivotal vote on Thursday revealed a sharp division among shareholders and diminished the prospect of a rapid turnround for one of Japan’s most famous industrial names. The vote triggered a heavy sell-off of Toshiba shares, which fell by as much as 5 per cent.
The vote concluded an extraordinary general meeting held in the hope of ending a period of turmoil that has forced the resignation of two chief executives and raised the possibility of the company being taken private in what would have been Japan’s biggest ever buyout.
A plan proposed last year by UBS bankers to split the company into three was strongly opposed by shareholders and later abandoned, with the two-way division then presented as the best and most cost-effective alternative.
But in yet another twist to the saga, shareholders also used the EGM to vote down a proposal from Toshiba’s second-largest shareholder — the Singapore fund 3D Investment Partners — that would have obliged the company to reopen talks with private equity firms and other investors towards a possible take-private deal.
Several of Toshiba’s largest investors, which include the Singaporean fund Effissimo, the US fund Farallon Capital and a variety of smaller hedge funds, have been agitating for a take-private deal. They have argued that at an earlier strategic review the company did not properly explore that possibility.
The rejection of both Toshiba’s and 3D’s proposals appears to create a stalemate, but some shareholders said that the outcome could have positive results. The lack of a clear mandate for action from shareholders could give Taro Shimada, the new chief executive appointed earlier this month, freedom to impose his own potentially radical ideas for a turnround, according to investors.
Shimada did not express his opinion on the proposals during the EGM, saying it was not “appropriate to express my personal thoughts today”. Investors have told the Financial Times that privately he has indicated his support for a take-private option, which could remain a possibility even with the formal vote defeated.
When announcing the vote result, Shimada only said the company will “consider various options to improve our corporate value”.
As the Tokyo market reopened for the afternoon session, Toshiba stock erased morning gains and joined the worst performers on the bourse, at one point falling 5 per cent from the day’s highs and touching ¥4,542.
Satoshi Tsunakawa, the previous chief executive of Toshiba who now serves as the chair of the board, has opposed the buyout option saying it could result in the company losing public orders and warning Toshiba would be forced to sell sensitive segments in its defence and nuclear divisions .
At the meeting on Thursday he told investors that a privatisation would mean that foreign funds will buy the company. “We made the proposal because we wanted to carry out the split on our own,” he said.