Toshiba's board planned to oust troubled CEO Nobuaki Kurumatani before CVC Capital Partners launched a $20 billion buyout bid last week, informing him a day before the offer was announced that it would replace him, people familiar with the matter said.
Two members of Toshiba Corp's nomination committee, including board chairman Osamu Nagayama, met Kurumatani, himself a former CVC executive, and told him they intended to look for a new chief executive, three of the people said.
Kurumatani then told them of the European private equity firm's plan to take Toshiba private, the three people said. A day later, the Japanese conglomerate announced it had received the offer, two of them said.
The events of the meeting show how Kurumatani's tenure was undone by his flagging popularity even before the offer was announced. It marked the culmination of deepening discord between Kurumatani and activist shareholders, who had raised concern over what they said were governance issues.
The plan to remove him appears to have accelerated after the April 6 meeting at Toshiba's headquarters next to Tokyo Bay. On Wednesday, Toshiba said the onetime Sumitomo Mitsui Financial Group banker was stepping down after some three years at the helm.
Support for him both within the company and among investors had eroded, a person briefed on the matter said. All of the sources declined to be identified because of the sensitivity of the issue.
"A survey of managers at Toshiba showed low support for Kurumatani," the person who was briefed said. There was "deep distrust" of him among shareholders, the person said.
Toshiba said on Wednesday that Kurumatani was stepping down. It said he was doing so to "recharge" and after achieving his plan to revive the conglomerate that had been weakened by an accounting scandal.
Reuters was not immediately able to reach Kurumatani for comment on this story. Nagayama declined to comment. Toshiba said it could not comment on speculation. A representative for CVC Japan declined to comment.
Joining Toshiba in 2018 from CVC's Japan unit with a pledge to reshape a sprawling, 150-year-old enterprise, Kurumatani was a rare outsider in the storied corporation, where managers typically toil for decades before reaching the executive suite.
The challenge against him escalated last month when activist investors won an emergency shareholders meeting vote to establish an independent probe into whether management had previously pressured shareholder over shareholder votes.
An earlier, internal probe by Toshiba had found no fault.
That vote convinced the board Kurumatani was unlikely to win backing at the next annual shareholders' meeting, a second person who briefed on the matter said. At the last shareholders' meeting he won only 57% of the vote, a stinging rebuke in a country where management is rarely challenged.
His departure could dent CVC's chances of taking control of Toshiba, a move that would have closed down attempts to shine a light on management decisions.
Toshiba executives are lobbying against the CVC offer with government officials, who will have to approve any deal because the company builds nuclear reactor manufacturers and defence equipment, according to the person briefed on the matter.
"It's a deal nobody wants. Toshiba has various businesses linked to national defence and foreign ownership could result in client exodus," a person familiar with the board's thinking said.
CVC plans to stick with its takeover bid, Japanese media reported Wednesday, offering a 30% premium over Toshiba's current share price. Hong Kong-based activist fund Oasis Management has slammed that as too low, while U.S. hedge fund Farallon Capital Management has called on Toshiba to solicit other bids.
For now, company chairman Satoshi Tsunakawa, 65, who joined Toshiba in 1979, will manage the company, including having to deal with CVC and other potential bidders. Those could include U.S. investment firm KKR and Canada'a Brookfield Asset Management Inc according to a Financial Times report.
"We have a shortage of internal candidates for the top post but it will be difficult bring in an outsider after getting rid of Kurumatani," a source familiar with internal discussions at Toshiba said.
($1 = 109.6600 yen)
(Reporting by Makiko Yamazaki, Noriyuki Hirata and Takashi Umekawa; Writing by Tim Kelly; Editing by David Dolan and Raju Gopalakrishnan)