Opposition to Toshiba break-up grows as top shareholder, proxy firms speak out

The top shareholder in Toshiba Corp and two influential proxy advisory firms joined a growing list of investors on Thursday who oppose the Japanese firm's plan to split up and dismantle the 146-year-old conglomerate.

It marks the latest in a long battle between the once-mighty tech company and a number of its foreign shareholders as it tries to revive itself following years of accounting scandals and governance issues.

Toshiba will hold an extraordinary shareholders' meeting on March 24 to put its plan to split in two, drawn up originally after a five-month strategic review, to a vote.

Effissimo Capital Management, which owns a stake of about 10% in Toshiba, said in a statement it has decided to vote against the plan, which has been criticised by some other hedge fund shareholders that favour a sale to a private equity firm.

The Singapore-based fund called on Toshiba to establish a trustworthy leadership team first, saying the current management and board are not capable of crafting "a strategic plan with such irreversible and profound consequences."

The plan, "may ultimately damage Toshiba's medium- to long-term corporate value," it said.

Separately, proxy advisory firm Institutional Shareholder Services (ISS) advised against the break-up plan in a report dated Thursday.

"Years of corporate governance turmoil ... a split shareholder base, and an uninspiring management track record raise significant scepticism as to whether the current plan is superior to a privatisation proposal," ISS said.

ISS also recommended shareholders vote against a proposal from the second-largest shareholder, Singapore-based 3D Investment Partners, that Toshiba explore other options and solicit buyout offers from private equity firms.

The proposal to direct the board towards more explicitly considering a sale of the company "appears overly prescriptive and premature given the three months remaining until the company's annual shareholders meeting," it said.

Glass Lewis, another influential proxy advisory firm, issued a report later on Thursday recommending against the management-backed break-up and advising acceptance of 3D's proposal to restart the strategic review.

Toshiba's core review of available alternatives was "overtly narrow" and not transparent enough to convince investors that the break-up plan was the most compelling path forward, Glass Lewis said. The review also sidestepped urgent investor feedback and widely reported interest from private equity firms, it said.

Toshiba said in response to the Effissimo statement and the ISS recommendation that it would continue to make every effort to explain its proposal to shareholders to gain their support. It had no immediate comment on Glass Lewis.

Toshiba earlier this month appointed an interim chief executive after shareholders voiced concerns that management had not appeared able to proceed with the company's restructuring plan in a timely manner.

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