Elliott builds Toshiba stake adding pressure to review

Elliott Investment Management said it has a become a “significant investor” in Toshiba Corp. at a time when the board is still deciding whether to take the troubled company private.
 

“Our investment in Toshiba reflects our strong conviction in the company’s underlying value,” an Elliott spokesperson said in an emailed statement. “We have been encouraged by the constructive nature of our engagement with the company in recent months.”

The U.S.-based hedge fund, run by billionaire Paul Singer, has been a small investor in the Japanese conglomerate for several years but increased its stake significantly after private equity firm CVC Capital Partners approached Toshiba about a potential takeover earlier this year, according to people familiar with the matter. 

Elliott owns less than 5% of the company but is a top 10 holder in the company, the people said, asking not to be identified because the matter isn’t public.  

A representative for Toshiba declined to comment. 

Toshiba and representatives of Elliott have held several meetings, and the discussions have been focused on how Toshiba can unlock the value of its underlying businesses, including its 40% stake in its former chip unit, Kioxia. Sources familiar with to those discussions have said Elliott believes the company is worth 6,000 yen ($53.67) per share, and is open to any avenue that would unlock that value, including an outright sale. 

Toshiba’s shares closed at 4,715 yen in Tokyo Wednesday. 

Toshiba has been telling its shareholders in recent months that it is exploring three potential avenues to unlock value, including an outright sale of the business, the people said. It is also considering selling a significant minority stake to a private equity buyer, or breaking up the business and selling off non-core businesses, they said.

The Financial Times earlier broke the news on Elliott’s stake. Representatives for Elliott and Toshiba declined to comment further. 

Shareholder Rebellion
 

Toshiba’s board is undertaking the review after an activist-shareholder rebellion earlier this year led to the ouster of the chief executive officer and a board member.

Toshiba started weighing options including a privatization in May after weeks of takeover discussions sparked by private equity firm CVC’s $21 billion acquisition bid. Investors have pressured the Japanese energy-to-electronics conglomerate to explore any serious interest in the company to rebuild shareholder trust.

Once a storied name in Japan, Toshiba has faded dramatically after years of management missteps. It paid a record fine in an accounting scandal and then lost billions on a bungled foray into nuclear power. The conglomerate invented flash memory three decades ago, but was forced to sell most of its prized chip business in 2018 because of losses in its nuclear-power operation.

Elliott has been an active investor in Japan for several years, including most recently at Softbank Group Corp.