You are here: Home » International » News » Companies
Business Standard

Toshiba board planned to oust CEO before $20 billion buyout offer: report

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

Topics
Toshiba | Global M&A | CEOs

Reuters  |  TOKYO 

Toshiba, Japan, electronics

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 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 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, 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.

ESCALATING CHALLENGE

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)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, April 14 2021. 14:40 IST
RECOMMENDED FOR YOU
.