Toshiba shareholders reject split plan and private sale

Back to the drawing board for company plagued by years of scandals

Toshiba's shareholders have rejected both the company's plan to split into two companies and a proposal to look for a private buyer.

The company today staged an extraordinary general meeting (EGM) to consider both proposals. The plan to split the company into two listed entities was developed by management after a previous plan to split into three was not well-received by investors.

Both plans were a response to years of management and governance failures – plus serious financial and corruption scandals – that drew investor agitation for a turnaround plan.

But major investors objected to the two-way split, arguing it was not the best way to realise the company's value.

Toshiba tried to assuage such concerns by suddenly and unexpectedly appointing a new CEO who claimed to have the digital savvy needed to turn the company around. Investors responded by pointing out that the new boss, Taro Shimada, had no experience with turnarounds of the size and complexity Toshiba clearly requires.

Shimada, meanwhile, maintained management's previous line of not being willing to shop Toshiba to private buyers – some of which have made exploratory inquiries.

Toshiba called today's EGM to seek approval for the two-way split. 3D Investment Partners, one of Toshiba's largest shareholders, also sought a vote on its proposal that the company should seek out private investors.

A statement [PDF] issued after the meeting reports that both proposals failed.

The document offered the following comment:

Toshiba accepts the opinion of the shareholders expressed at the EGM and will make best efforts to build trust with shareholders and reconsider its strategic options to enhance corporate value continuously.

CEO Taro Shimada told Japanese outlet Nikkei: "We are going to consider all options that will improve the value of our company."

"We will work hard to win the trust of all stakeholders, including shareholders, customers and employees, and to improve the value of our company," he added.

But how Toshiba will do so is uncertain. A key element of the split plan was selling its very valuable stake in memory-maker Kioxia and using that cash to reward shareholders, who – if the company keeps its usual investor relations schedule – get to meet again in late June at their regular annual meeting.

Toshiba management envisioned that gathering as the forum to agree formally on the plan to split the company. But with today's non-binding vote against the plan, it would be folly to assume the June meeting will adopt the split.

The Register will therefore keep watching Toshiba, which earlier this week announced it will invest $840 million in a new facility to make power management chips.

In other action on the Japanese semiconductor scene, chipmaker Renesas has announced a three-day delay to resumption of full capacity production after a recent earthquake. ®

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