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HONG KONG, March 11 (Reuters Breakingviews) – With Shakespearean flair, shareholder proxy adviser ISS has called down a plague on the houses of Toshiba’s (6502.T) management and its activist shareholders, recommending followers vote against management’s plan to split up the company and also against 3D Investment Partners’ pitch for a full sale. Rival Glass Lewis concurred with ISS about the breakup but supported the activists read more . Drama has been duly injected into the debate over how the $17 billion Japanese icon should fix itself.
Toshiba’s management proposes to spin out its devices business next year. Together with other planned sales, it expects to return some $2.6 billion to shareholders over two years. 3D wants it to explore other alternatives, including a sale to private equity. Neither proposal, due for voting on March 24, would be binding on the company.
Resistance to the split is rooted in distrust that executives could make a success of it before fixing the major governance failings. Those include an accounting scandal in 2015, the collapse of its Westinghouse nuclear business in 2017 and revelations last year of inappropriate ties between executives and government. Turmoil was in evidence again last week as Toshiba unexpectedly swapped interim boss Satoshi Tsunakawa for interim leader Taro Shimada, leaving management temporarily without a board seat.
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Toshiba’s shares, down some 10% since the company proposed, then abandoned, a three-way breakup in November, put its enterprise value at roughly $19 billion. Spinning off devices could fetch $6 billion if it gets valued along the lines of rival Seagate (STX.O), while the remaining infrastructure unit could be worth $14 billion using blended multiples of peers including Mitsubishi Electric , Hitachi and Siemens (SIEGn.DE).
Factor in $4 billion for its stake in chipmaker Kioxia and perhaps $7 billion from other sales, and activists’ hope that a buyout deal could close around 6,000 yen per share — a one-third premium to current levels — looks realistic. read more
ISS argues that 3D’s proposal could undermine management and suggests patience while other issues are ironed out. Yet the market is voting for action now. Shares pop up on any news hinting of change, then sink when it comes to naught. If insiders lose the upcoming vote, all options will get put back on the table. Toshiba’s next act could be even more dramatic.
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CONTEXT NEWS
– ISS and Glass Lewis, two leading shareholder adviser firms, have this week recommended Toshiba’s shareholders vote against its plan to split into two. Shareholders meet on March 24.
– ISS also recommended shareholders not support an alternative proposal from the company’s second-largest shareholder, 3D Investment Partners, that Toshiba executives study other options, including a full sale to private equity. Glass Lewis backed the 3D proposal.
– Effissimo Capital Management, Toshiba’s biggest shareholder, this week said it would not support the management’s plan.
– Toshiba’s proposal to spin off its devices business was put forward in February, amending a plan announced in November to separate into three companies. Several major shareholders expressed unhappiness with the three-way plan. The company later said it proved to be too complicated.
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Editing by Pete Sweeney and Thomas Shum
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
Register now for FREE unlimited access to Reuters.comHONG KONG, March 11 (Reuters Breakingviews) – With Shakespearean flair, shareholder proxy adviser ISS has called down a plague on the houses of Toshiba’s (6502.T) management and its activist shareholders, recommending followers vote against management’s plan to split up the company and also against 3D Investment Partners’ pitch for a full sale. Rival Glass Lewis concurred with ISS about the breakup but supported the activists read more . Drama has been duly injected into the debate over how the $17 billion Japanese icon should fix itself.Toshiba’s management proposes to spin out its devices business next year. Together with other planned sales, it expects to return some $2.6 billion to shareholders over two years. 3D wants it to explore other alternatives, including a sale to private equity. Neither proposal, due for voting on March 24, would be binding on the company.Resistance to the split is rooted in distrust that executives could make a success of it before fixing the major governance failings. Those include an accounting scandal in 2015, the collapse of its Westinghouse nuclear business in 2017 and revelations last year of inappropriate ties between executives and government. Turmoil was in evidence again last week as Toshiba unexpectedly swapped interim boss Satoshi Tsunakawa for interim leader Taro Shimada, leaving management temporarily without a board seat. Register now for FREE unlimited access to Reuters.comToshiba’s shares, down some 10% since the company proposed, then abandoned, a three-way breakup in November, put its enterprise value at roughly $19 billion. Spinning off devices could fetch $6 billion if it gets valued along the lines of rival Seagate (STX.O), while the remaining infrastructure unit could be worth $14 billion using blended multiples of peers including Mitsubishi Electric , Hitachi and Siemens (SIEGn.DE).Factor in $4 billion for its stake in chipmaker Kioxia and perhaps $7 billion from other sales, and activists’ hope that a buyout deal could close around 6,000 yen per share — a one-third premium to current levels — looks realistic. read more ISS argues that 3D’s proposal could undermine management and suggests patience while other issues are ironed out. Yet the market is voting for action now. Shares pop up on any news hinting of change, then sink when it comes to naught. If insiders lose the upcoming vote, all options will get put back on the table. Toshiba’s next act could be even more dramatic.Follow @JennHughes13 on TwitterCONTEXT NEWS- ISS and Glass Lewis, two leading shareholder adviser firms, have this week recommended Toshiba’s shareholders vote against its plan to split into two. Shareholders meet on March 24.- ISS also recommended shareholders not support an alternative proposal from the company’s second-largest shareholder, 3D Investment Partners, that Toshiba executives study other options, including a full sale to private equity. Glass Lewis backed the 3D proposal.- Effissimo Capital Management, Toshiba’s biggest shareholder, this week said it would not support the management’s plan.- Toshiba’s proposal to spin off its devices business was put forward in February, amending a plan announced in November to separate into three companies. Several major shareholders expressed unhappiness with the three-way plan. The company later said it proved to be too complicated.Register now for FREE unlimited access to Reuters.comEditing by Pete Sweeney and Thomas ShumOur Standards: The Thomson Reuters Trust Principles.Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.