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Toshiba shareholders vote down both spin-off plan and call to seek buyout offers

By Makiko Yamazaki

TOKYO (Reuters) -Toshiba Corp shareholders on Thursday voted against its plan to spin off its devices unit, but a separate motion backed by activist shareholders that called for the conglomerate to solicit buyout offers also failed to gain sufficient support.

The result of the extraordinary general meeting will likely force Toshiba (OTC:TOSYY) to revise its controversial restructuring plan and ensure that there will be no immediate end to a four-year scandal-filled battle between management and foreign activist hedge funds.

Toshiba’s shares slid 3% after the results.

The proposal to seek private equity buyout offers or a minority investment was made by Singapore-based 3D Investment Partners, Toshiba’s No.2 shareholder and was also supported by top shareholder Effissimo Capital Management and No. 3 shareholder Farallon Capital Management.

“Taking account into the opinions presented by shareholders, we will consider various strategic options to increase corporate value,” Taro Shimada, a former Siemens AG (OTC:SIEGY) executive, who took helm of Toshiba this month, said at the end of the meeting.

Each proposal needed 50% of the vote to pass. A breakdown of the voting was not immediately available.

Activist shareholders plan to fight on to force the company to restart talks with private equity firms regardless of the vote outcome, sources familiar with the matter have previously told Reuters on condition of anonymity.

Some shareholders have said they expect one or two top investors nominate their own representatives for the board at Toshiba’s annual shareholders meeting in June to make the company solicit private equity buyout offers.

The failure of 3D’s motion “doesn’t mean it is over, and it doesn’t mean Toshiba can’t act on some portion of the contents of 3D’s proposal,” said Travis Lundy, an analyst at Quiddity Advisors in Hong Kong who publishes on Smartkarma.

“What it really means is that Toshiba has to come up with some other means by which they can measure success,” he said.

A private equity buyout could allow activist investors that bought into the crisis-ridden conglomerate over the last six years to make an exit with solid returns.

Toshiba previously rejected calls to seek buyout bids arguing that potential offers suggested so far were insufficiently compelling and would raise concerns about the impact on its business and staff retention.

The make-up of the board could also shift amid criticism that it conducted a flawed strategic review that led to the plans to break up the company.

Paul Brough, the chair of the five-member strategic review committee, has indicated he would reconsider his position if the breakup plan was voted down, proxy advisory firm Institutional Shareholder Services (ISS) said in a report.

During the five-month strategic review conducted last year, Toshiba held discussions with private equity firms but decided not to entertain potential offers.

It also walked away from advanced talks for a minority stake from Canada’s Brookfield Asset Management, sources have said, adding that the private equity firms Toshiba held talks with included KKR & Co (NYSE:KKR) Inc and Bain Capital.

Toshiba’s management has been under pressure from activist funds since it sold 600 billion yen ($5 billion) of stock to dozens of foreign hedge funds during a crisis stemming from the bankruptcy of its U.S. nuclear power unit in 2017.

Acrimony between the two sides hit several boiling points in the past two years. Last June a shareholder-commissioned probe found Toshiba colluded with Japan’s trade ministry – which sees the conglomerate as a strategic asset due to its nuclear reactor and defence technology – to block overseas investors from gaining influence at its 2020 shareholder meeting.

Source : Reuters

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