Toshiba shareholder urges takeover talks with Bain and other private equity groups

Toshiba’s second-biggest shareholder 3D Investment Partners is urging the company to start talks on a take-private deal after it was announced last week that Bain Capital is ready to propose a takeover deal for the $17 billion company.

The Singaporean hedge fund said in a letter sent Wednesday to Toshiba’s board and management that the company had become “an embarrassing corporate governance embarrassment for Japan” as it lurched from crisis to crisis.

It urged Toshiba to resume its strategic review process and look at it seriously potential buyers and to offer board nominees from major shareholders ahead of the annual general meeting scheduled for June.

The company must “resume the strategic review process and initiate and solicit bids for all or part of Toshiba and minority holdings,” 3D’s letter said. Toshiba did not comment immediately.

Toshiba said last week it would “make every effort to build trust with shareholders and to reconsider its strategic options to continually increase shareholder value.”

3D’s intervention reflects growing concern among Toshiba investors that the company’s split board will dissolve a Strategic Review Committee (SRC) established last year, giving momentum to chart a future strategy after a period of turmoil that has befallen the conglomerate to the brink of bankruptcy would derail.

A takeover of Toshiba, which has businesses in sensitive areas like nuclear power, defense and semiconductors, would be one of Japan’s biggest ever take-private deals and a major milestone in Toshiba’s rise private equity in the third largest economy in the world.

The SRC was advised by UBS last November to split Toshiba into three parts, but the company had to back down when shareholders protested vehemently.

A second plan to split the company in two was defeated by the shareholders Last month. Despite advice that was rejected by shareholders, Toshiba said it would keep UBS as an adviser. Shareholders also rejected 3D’s competing proposal to resume takeover talks.

Last week, Bain enlisted the support of the company’s largest shareholder, Effissimo, and opened talks with other investors about a potential deal to privatize the 146-year-old Japanese conglomerate.

Although Bain has yet to make a formal offer, people familiar with the situation said the US private equity group was in talks with Japanese investors to join an acquisition consortium that would offer a “Japanese solution” to Toshiba’s woes.

3D’s new demands, set out in a letter from the Financial Times, are increasing the pressure on the group’s new CEO Taro Shimada, which has promised to restore the board’s relationship with shareholders and lead Toshiba out of years of scandals. He is known internally for resuming talks with private equity for a buyout deal.

Additional reporting by Eri Sugiura Toshiba shareholder urges takeover talks with Bain and other private equity groups

Adam Bradshaw

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