Shareholders of Toshiba Corp Rejected Both Proposals

Shareholders of Toshiba Corp rejected competing proposals on Thursday. The voted down proposals – one presented by management and the other backed by activists. 

Toshiba’s management plan to spin off the company’s devices unit and the separate call to seek buyout offers both failed to gain the required 50% of the vote. 

Shareholders’ decision ensures there will be no immediate end to a battle between the management and foreign activist hedge funds. The untidy outcome once again highlighted the severity of the problem.

Opposition to the management’s plans to break up Toshiba had been widespread and included proxy advisory firms. So, it was not surprising that the company’s management failed to obtain shareholders’ approval. 

Nevertheless, the outlook for 3D Investment Partners’ proposal that Toshiba seeks private equity buyout offers or a minority investment had been less clear out. 

Singapore-based 3D Investment Partners and the company’s other two top shareholders the quest for a buyout offer. Still, proxy advisory firm Institutional Shareholder Services (ISS) advised against a buyout offer.

Toshiba and activists

Toshiba’s new CEO Taro Shimada made a brief comment about the situation. The company’s CEO stated that the company “would consider various strategic options”.

For some observers, the outcome represented a major setback for the activist hedge funds. However, the push for a buyout is far from over. 

Activist shareholders are not ready to abandon their plan. They plan to fight to force Toshiba to restart talks with private equity firms regardless of the decision made by shareholders. Some of them also said they expect one or two top investors to nominate their own representatives for the company’s annual shareholders meeting in June. 

The company held discussions with private equity firms but decided not to entertain potential offers. Toshiba also walked away from advanced talks for a minority stake from Canada’s Brookfield Asset Management. 

The animosity between the company’s management and activists hit several boiling points in the past two years. In 2021, a shareholder-commissioned probe found that Toshiba colluded with Japan’s trade ministry to block overseas investors from gaining influence at its 2020 shareholder meeting. 

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