Toshiba Corp. is self-medicating with Activision supplements. Good effort, but a company that is almost a century and a half old will need some more strengthening. After a race of accounting scandals, bankruptcy and a brush with horrific findings earlier this year, Toshiba worked with the government to prevent shareholders from exercising their rights, the Japanese conglomerate itself. Comes up with another way to visualize and calm down. investor. But the new plan released last week isn’t exactly what investors and shareholders asked for, nor does it fully live up to its apologetic promises.
In a worker-style presentation, Toshiba laid out its blueprint for dividing the business into three segments. The neatly divided move on the giant conglomerate sounds good on paper, but the 36-pager misses a key point: how a breakup would address poor governance, a history of massive mismanagement and missteps that have consistently dented shareholder confidence. is broken.
Along with the presentation, the board’s Strategic Review Committee delivered a letter to shareholders that includes details on how it arrived at the break-up plan. The first thing they did, it says, was “listening to the voices of the shareholders.” They address a variety of options, including going publicly listed and bringing in minority investors during full privatization. While the letter goes to great lengths to please investors, one wonders how serious the process really was.
If the board and management wanted the best way forward, their plan would have been transparent. They will release details of their findings, including comparative prices, timing, asset valuations and discount rates. He didn’t. In fact, the letter appears to confirm that the company is not actively rebuilding shareholder trust and governance or envisaging how real change will happen.
Of the options considered, personalization could have been a game-changer. It was seen as the best way to solve the problems that plagued Toshiba without the public spectacle that investors had asked the committee to consider, according to the letter. Some private equity houses wanted this even before the June scandal: In April, CVC Capital Partners made a $20 billion offer to take the company private. The stock had gone up at that time. Shortly after, other global firms joined in, but the company eventually turned down the offers.
This time, instead of looking for new non-binding proposals that could be used to evaluate the feasibility of such a plan, the committee stated that it had determined that the range of prices was “in line with the market expressed to date in the media”. expectations”, without giving numbers. It also stated that “a carefully planned competitive auction process with due diligence had not yet been conducted,” but that it was up to the Committee to decide. There was substantial existing information. It said that management had “expressed concerns regarding the potential negative impact of privatization on businesses.” The letter said the minority investment plan was discussed and including seeking the support of existing shareholders Found challenging for a number of reasons, so he believed the severance plan would be “highly attractive” to shareholders and management thought it would be “accretion”.
Whether the proposed split is the best way forward is not clear. There is already some doubt around whether it will bring the most value. What’s more, there has never been a real discussion of the numbers or details surrounding the comparative value of businesses arising from different options. Toshiba barely scratches the surface about reforming leadership roles or discussing how the company will be run.
Ultimately, the make-up, break-up and some additional capital will do little to regain shareholder confidence. The firm needs to go deeper. It is the responsibility of the company to give details of how the firm will be run, who will run it and under what governance structure. Any healthy change will depend on breaking those bad habits that seem to be entrenched – and that starts with fresh blood coming in.
The next test for Toshiba’s integrity will be how it gains approval for its plan: will it try to achieve a two-thirds shareholder majority? All of this is painful and requires a lot of back and forth with stakeholders. But, as a public company, it has signed up for it. When private equity is knocking, the house is ready to clean, the option—just going private—becomes very easy. However, Toshiba rejected it before it even started. The Board and Management need to confront the fact that palliative care will no longer reduce it; Only profound, surgical change will occur.
Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia.
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