Toshiba’s second-largest investor is calling for a showdown. Singapore-based hedge fund 3D wants an extraordinary meeting where shareholders would vote on the break-up plan of the Japanese conglomerate. For now, activists are the more convincing advocates of a turnround than Toshiba’s own management.
Toshiba plans to split into three separately listed parts: infrastructure services, devices and an asset management group dealing with holdings such as memory chip business Kioxia. If other shareholders back 3D’s proposals in a vote, Toshiba’s break-up plans might fall through.
Showdowns between Toshiba and foreign investors, many of them activist funds, have been frequent over the past four years. It would be easy to dismiss the latest proposal from 3D as just another flurry.
But 3D, which owns more than 7 per cent of Toshiba, has a point. The costs of the split, which Toshiba has said would run to $86m, look steep. Toshiba does not even know if it will get shareholder approval in a vote at the annual meeting in 2023.
Even if all goes as planned, the split would not be complete until the second half of 2023. Investors would then have to wait several more years to see if the surgery has worked. That suggests a turnround would be slow, if it occurs at all.
A partial sale to private equity funds looks much more attractive to investors. They have little faith left in the company following its 2015 accounting scandal. Toshiba has reportedly walked away from several potential buyout offers at substantial premiums.
There is value to unlock. Toshiba shares trade well below the group’s sum-of-the-parts valuation. The infrastructure systems unit, assuming $430m of operating profit in the current fiscal year to March, could fetch about $6.5bn. Kioxia has an estimated value of about $30bn, implying Toshiba’s 40 per cent stake is worth $12bn. The value of the two units already surpass its market value of $18bn.
That sum does not even include four other main business units, including energy systems and printing. Investors are right to expect better from Toshiba.
