King Street Capital, a $20bn activist fund said it will ask shareholders to replace a majority of the Toshiba board, escalating a fight with the Japanese industrial conglomerate as it struggles to become profitable again after suffering a series of corporate blows.
The New York-headquartered fund, which is one of Toshiba’s largest shareholders with a 5.4 per cent stake, said it would nominate a number of independent directors, including the its co-founder, Brian Higgins, at the company’s annual shareholder meeting.
In a letter on Monday to Nobuaki Kurumatani, Toshiba’s chairman and chief executive officer, the King Street said it hopes to settle the fight, but “otherwise we will be proposing a specific slate of directors in a timely manner to comply with Toshiba’s corporate calendar.” It did not specify how many directors it would nominate.
Toshiba, which is still recovering from a crisis in 2017 after its US nuclear unit Westinghouse racked up large liabilities, has been hit by higher manufacturing costs in smartphone and car chips and a weak energy business. The company has undertaken a strategic overhaul, entitled “Next Plan”, to lift sales and cut costs.
The company said in November it would liquidate its UK nuclear arm NuGen and pull out of its US liquefied natural gas business. In 2017, it sold its prized memory chip business to a consortium for $17.7bn as pressure mounted form its biggest creditors and it sought to avoid being delisted from the Tokyo Stock Exchange.
“Our goal is to return Toshiba to its rightful place as a crown jewel of corporate Japan,” the hedge fund said in the letter.
The new board needs to apply more “rigorous financial discipline to capital allocation decisions,” persuade management to review the company’s business portfolio and evaluate underperforming businesses, and to “instill a culture of accountability and ownership at all levels of the organisation.”
“The current directors have done a commendable job navigating the company through the last several years, and we thank them for their service,” King Street added. “Now, however, a different type of board is needed to lead its turnaround plan.”
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