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Thursday, December 2, 2021

Toshiba’s board of directors ruled out a transaction to privatize the entire group

According to people familiar with the matter, Toshiba’s board of directors is prepared to rule out a deal that seeks to privatize the entire company and is preparing to announce an alternative plan to split the business into three. Some investors said they might reject the plan.

In April, the British private equity group CVC offered the conglomerate a $20 billion offer to boost the stock price. Since then, the stock price has remained high because it hopes that Toshiba can make the largest acquisition in Japan’s history.

But after the rare and successful resistance of shareholders asking for a takeover transaction or a complete reorganization, Toshiba was forced to form a special committee to review options for reducing the company’s huge “group discount”.

The committee will propose a plan on Friday to split Toshiba into three companies and leave at least one of its businesses (probably a company specializing in small devices and semiconductors) to private equity.

One of these three companies will mainly hold Toshiba’s infrastructure, nuclear energy and heavy engineering businesses, as well as sensitive technologies in areas such as artificial intelligence and quantum computing, and may be subject to Japan’s newly tightened Foreign Exchange and Foreign Trade Law. protect.

The other company will operate as an asset management arm and will hold 40% of Toshiba’s Kioxia shares. The company sold part of it to the memory business of private equity group Bain Capital in 2018. The company’s successful office and retail machinery manufacturer Toshiba Tec will also participate in this sector.

Toshiba’s reorganization proposal must be approved by shareholders at the extraordinary general meeting, which is the result of four months of intensive deliberations on how to restore the fate of the company that was on the verge of bankruptcy in 2017.

As part of the financial project trying to end that turbulent period, Toshiba issued new shares. A large part of this ended up in the hands of activist investors, who have been shown to be capable of defeating management in shareholder votes.

Since the tripartite split plan was leaked this week, nine investors representing approximately 30% of Toshiba’s shares told the Financial Times that they thought the proposal was disappointing and unrealistic.

“If the split is a backup plan, then it is acceptable, but only if the company starts the sales process [to private equity] It failed,” one shareholder said.

Several shareholders said they were disappointed that the split plan had become a more popular option than selling the entire company to private equity, and some believed it would unlock more value.

“From the small amount of information we currently have, the three-way split does not sound like something we want to support. I think there will still be investors who don’t believe that the entire company has no private equity transactions,” said one shareholder.

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