Toshiba "split interruption" What's ahead?

April 8 21:09

Toshiba's management is moving at a dizzying pace, just like an economic novel.

Increasing shareholder opposition, board members in line with this, consideration of acquisitions by leading foreign funds, and the unusual plan of splitting the company have been suspended, virtually blank.

The turmoil has deepened this spring.

Is there an exit?

Think about what is required of Toshiba's management.

(Kenta Shimai, Reporter, Ministry of Economic Affairs)

Management policy that changes over and over

Confrontation with so-called "shareholders who say things" is the cause of confusion over Toshiba's management.

So why is this situation continuing?

I would like to think from the perspective of investment funds and asset management companies that are “shareholders who say things”.

1. I want to sell my Toshiba stock at a high price.

To that end, "unlisting".

2. If that doesn't work, take measures to raise the stock price.

Or give back to shareholders with dividends.

Let's start with 1.

Investment funds and others invest in Toshiba stock with funds collected from all over the world.

You have to sell at a higher price than when you bought it and make a profit.

So how can you sell your stock at a high price?

What is emerging is "unlisted".

"Unlisting" means that a company or a third party buys shares in the market and delists the company.

The company has the advantage of being able to manage flexibly without being affected by shareholders.

However, no one will accept a low price to buy stock.

Therefore, it is common to buy with a "premium" of about 20% to 30% of the market price.

This allows shareholders to sell their shares high and make a profit.

However, the market capitalization of Toshiba stock is about 2 trillion yen.

If you add a premium to this, a cost of nearly 3 trillion yen is required for "unlisting".

There aren't many sources of such funds in Japan.

Why don't you send it to foreign capital?

There seems to be a view that Toshiba has nuclear power plants and defense-related businesses.

Therefore, from the perspective of economic security, there is a view that acquisitions by foreign capital have high hurdles.

In fact, a British investment fund offered to buy Toshiba last April, but it disappeared without progress.

Under such circumstances, Toshiba launched "2".

It was a measure to raise the stock price of the company.

Toshiba is a conglomerate with a wide range of businesses such as infrastructure and semiconductors.

However, when looking at the stock price, it is pointed out that each business value is not reflected in the value of the entire company, but rather falls into the so-called "conglomerate discount", which is evaluated at a bargain price.

In order to avoid this criticism, the management team, including former president Satoshi Tsunakawa, thought of a "company split."

In November last year, we announced a policy of splitting into three, with the aim of making it easier to evaluate the value of each company by dividing it into businesses.

After that, I made some modifications and finally came up with the following strategy.

○ Split the company into two (by separating the device business)

○ Sell the three businesses of air conditioning, elevator, and lighting

○ Implement a shareholder return of 300 billion yen

If the company is split, the shares may be split into two for shareholders, and 1 + 1 may become 2 or more, and the consideration for shareholders who say things is strongly bleeding, such as stepping up to bold shareholder returns by selling the business. ..

Toshiba then held an extraordinary general meeting of shareholders in March to hear the opinions of shareholders on this proposal.

Change of president of Kishikaisei before the general meeting

However, the strategy summarized by the president's liver is exposed to severe criticism immediately after the announcement.

From the shareholders who say things , ▼

the profits obtained from delisting are greater,

▼ the return to shareholders is insufficient, and

I received a fierce push.

To overcome the tough times, the company is going to do something strange.

On March 1, less than a month before the general meeting of shareholders, Satoshi Tsunakawa retired from the position of president and announced the appointment of Taro Shimada, who was an officer in charge of digital, as the new president.

The outside director decided that the reason why support for this strategy was not widespread was that the steering of the management team led by Mr. Tsunakawa was questioned, and he tried to improve the situation by changing the president.

Toshiba is driven into opposition

Still, shareholders who say things have expressed opposition one after another, and the situation is getting worse.

In addition to the opposition of the largest shareholders, Effissimo Capital Management and Farallon Capital Management, major advisory firms that have an influence on institutional investors also recommended opposition to the split proposal.

In addition, unexpected situations will occur within the company, which should be united and united at the general meeting.

A week before the meeting, outside director Raymond Zeiji said on Twitter that he "agrees" with shareholder proposals to consider delisting the company.

Mr. Zeiji is a person who was appointed as a director with the support of shareholders who say things.

The company has decided to "disagree" with the proposals of shareholders.

Mr. Zeiji was a major member of Toshiba's strategy development such as splitting and business sale.

For that reason, his actions exposed the danger of Toshiba's management, which makes important decisions centered on outside directors.

Severe criticism erupted at the general meeting

And the extraordinary general meeting of shareholders on March 24th.

189 shareholders visited the venue.

Speaking of shareholders, the voices of overseas investment funds have been attracting attention, but most of the people who gathered at the venue are general individual shareholders.

It was noticed what they had, which they usually do not express their opinions.

Then, from a completely different point of view from the shareholders who say things, there were opinions against the company's strategy.

Shareholders' opinion

"I don't want to pay dividends until I sell my business."

"The reason I survived the past deficit is because Toshiba has multiple businesses."

Both are the exact opposite of the shareholders who say things.

There were also criticisms of outside directors making important management decisions.

Shareholders' opinion

"I think this happened because the outside directors are not working properly. The outside directors are selected with the intention of a specific major shareholder and induce the fund to make money. Isn't it? "

As a result of the vote, the company's proposal was rejected by a large margin, with less than 40% of the approval.

The strategy formulated with the aim of "improving shareholder value" was not supported by the shareholders who say things and the general shareholders.

Delisting that emerges immediately after the general meeting

When the shareholders' meeting is over and I think I'm in a lull for a while, things move right away.

A week after the General Assembly, Effissimo Capital Management announced its willingness to cooperate with Bain if Toshiba is acquired by the American investment fund Bain Capital.

It is a form in which the largest shareholder and a leading fund have joined hands with the emerging "delisting" in mind.

Bain Capital is known as a fund that bought the memory business (now Kioxia HD) from Toshiba four years ago.

Due to the recent depreciation of the yen, there seems to be a view that Toshiba stocks are cheap from the perspective of overseas funds.

It has been pointed out that the movement of such investment funds will become even more active in the future.

The company has also begun to move towards the next phase.

On April 7, we announced that we would suspend the procedures for splitting and selling (* excluding the air-conditioning business, which has a fixed contract), and decided to rethink the strategy we had been discussing for nearly a year.

In the future, he announced that he would set up a "special committee" consisting of six outside directors to consider including the "delisting" of the company and report the situation before the general meeting of shareholders in June.

What will happen to the experts in the future?

How do business scholars view Toshiba's situation?

We asked Professor Atsushi Osanai of Waseda University Graduate School, who has experience working for an electrical equipment manufacturer.

First of all, he criticizes the lack of a vision that the company should aim for.

Professor Uchiuchi, Graduate School of Waseda University

"(Toshiba's management) is ad hoc, or if something happens, we will respond to it in the short term. If something else happens, we will respond differently. I think it was the last few years when management consistency, or trust and security, was greatly lost. "

" (Toshiba) had to show the purpose properly before showing the means. Non I think the biggest problem was that I couldn't see what it was for, whether it was open to the public or divided. "

On top of that, he explains that the "unlisted" that is currently emerging has certain merits.

(Advantages)

▼ Unlisted companies are suitable for swiftly performing complicated and difficult steering.

In particular, the fields of IoT and AI that Toshiba is focusing on are undergoing drastic changes.

▼ Unlisted companies are stronger in investing in business from a long-term perspective.

It is pointed out that in today's environment where technological progress is rapid and uncertainty is increasing, it is better to have a system that allows shareholders to make decisions without asking them each time.

On the other hand, Professor Nagauchi says that there are also disadvantages.

(Disadvantage)

▼ There is no obligation to disclose management information, and it becomes difficult to see the management situation.

If information transparency is not ensured, bidding for public works projects may have an impact.

▼ It will not be possible to raise funds necessary for business investment from the stock market.

In order to carry out highly public businesses such as infrastructure businesses, even if they are unlisted, higher autonomy than they are now listed will be required.

On top of that, Professor Nagauchi argues that it is necessary to firmly define his own purpose as to where Toshiba itself will proceed.

Professor Uchiuchi, Graduate School of Waseda University

"It means that no matter which way you fall, you are waiting for a difficult situation. Do you want to explain to stakeholders (related parties) while continuing to be listed? I think it's a story that ends up in what Toshiba wants to do in the future. "

The day after the general meeting, President Shimada emailed the employees, "This is the real game. Let's show our strength."

The state-of-the-art innovation and manufacturing power are highly evaluated.

For that reason, the question is whether we can pave the way for normalization of governance (corporate governance) as soon as possible.

Reporter of the Ministry of Economic Affairs

Kenta Shimai

Joined in 2012

After working at the Miyazaki and Morioka stations, he is currently affiliated.