Farallon Urges Toshiba Shareholders to Make Their Voices Heard at Upcoming EGM

March 14, 2021 11:43 PM EDT

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A Vote FOR Farallon’s Proposal Is a Vote for Improved Accountability and Trust at Toshiba

Highlights a Chorus of Support for Farallon’s Arguments and Proposal Among Third Parties

SAN FRANCISCO--(BUSINESS WIRE)-- Farallon Capital Management, L.L.C. ("Farallon") today issued a statement urging shareholders of Toshiba Corporation ("Toshiba" or the "Company") (6502.T) to vote FOR Farallon’s capital allocation proposal at the extraordinary general meeting of shareholders ("EGM"), which is scheduled to be held on March 18, 2021:

As the second-largest shareholder of Toshiba, Farallon is asking all Toshiba shareholders to support our EGM proposal calling upon the Company to honor its capital allocation commitments under the Toshiba Next Plan (“TNP”), or to explain to and seek approval from shareholders for capital policy changes. We urge all shareholders to check with their clearing brokers and determine their specific deadline to ensure that their votes count.

In its November 2020 progress report, the Company announced a sudden and dramatic shift from its commitment to the very clear capital policy outlined in the TNP. Specifically, Toshiba explicitly stated its intention to use ¥1.3 trillion of excess cash flow on investments, including large-scale M&A, which had not previously been part of the TNP. The sudden departure is concerning given Toshiba’s dismal track record in M&A.

Toshiba's defensive response to our calling of an EGM has confirmed the critical importance of shareholders making their voices heard. The Company continues to provide ambiguous and contradictory statements that have led to further distrust from shareholders. Toshiba has self-servingly mischaracterized our proposal (claiming it would reduce the Company’s flexibility)1, when the proposal does nothing of the sort — it simply asks Toshiba to adhere to the TNP (which itself is very flexible), or to be transparent with shareholders about a new plan.

Although EGM resolutions in Japan and around the world often receive only minority support (often less than 25%), shareholders should not be content until Toshiba demonstrates it has earned the trust of all its shareholders. Meaningful support for our resolution reflects that Toshiba still has work to do.

We believe it is critical for shareholders to express their views now to ensure Toshiba receives a clear and unambiguous message: Toshiba shareholders want transparency and accountability.

Independent commentators and proxy advisory firms agree that change is needed at Toshiba:

  • Leading independent proxy advisory firm Glass, Lewis & Co. (“Glass Lewis”) recommended that shareholders vote FOR Farallon’s proposal2:

    “Farallon's case here is well-rounded” and is “comprehensive and analytically persuasive.”

    “Farallon fairly and effectively highlights that Toshiba's revamped oversight team — entirely separate from the failings of prior boards — has largely foundered, leading to subpar shareholder returns and a depressed valuation, neither of which we would expect to improve to the extent there is ambiguity around the Company's strategic and financial direction.”
  • Leading independent proxy advisory firm Institutional Shareholder Services (“ISS”) determined:

    There is an “urgent need to address the deteriorating trust of [Toshiba’s] shareholder base.”

    “Given Toshiba's prolonged poor performance and the various controversies that have plagued the company in recent years, there is a reasonable basis for Farallon's skepticism.”
  • The California State Teachers' Retirement System (CalSTRS), the second largest public pension fund in the United States publicly disclosed that it voted FOR Farallon’s proposal.3
  • Corporate governance-focused media outlet CorpGov.com, in an article entitled “Toshiba CEO Kurumatani Shouldn’t Put Politics and Personal Agenda Before Shareholders,”4 noted:

    “Amazingly, shareholders explicitly requested the ability to have a say on capital allocation policy at the 2020 annual meeting. That provision exists at many other Japanese companies but had been absent at Toshiba until last year. But just a few months later, Mr. Kurumatani essentially went rogue by announcing his big M&A plans.

    Such a flagrant disregard for shareholders could cause trust in Mr. Kurumatani to erode. Any nods to the will of shareholders appear to be transactional moves designed to temporarily mollify them rather than earnest corporate policy changes.”

Numerous media outlets have noted the change in Toshiba’s capital allocation policy:

  • Bloomberg5:

    “Toshiba Corp., chastened by a string of disastrous overseas acquisitions, is once again looking to buy. This time more cautiously and closer to home.”

    “Toshiba’s compiling a list of targets and is considering borrowing to bankroll the deals…”
  • Nikkei6:

    “Toshiba's November progress report has a key ambiguity that leaves shareholders scratching their heads. It categorizes both M&A deals and stock buybacks under ‘strategic investment,’ which appears to amount to roughly 1 trillion yen. Whether this money is allocated toward growth -- by making acquisitions -- or by rewarding investors --- via stock buybacks -- can change on a whim.”
  • Reuters7:

    “’Capital in excess of the appropriate level will be used for shareholder returns,’ executive officer Masaharu Kamo said at an earnings briefing, an apparent change in tone from November when he said the firm would be proactive in making investments including M&A.”

Finally, the Financial Times8 captures the critical importance of this vote:

“[The EGM] is acting as a full-body MRI scan for the health of Japan’s capital markets after five years of claimed progress on governance.”

“Toshiba’s plight, say investors and academics, is not only a product of the company’s own missteps, but a crystallisation of common problems and management attitudes in corporate Japan.”

Farallon continued:

At this critical time as the government pushes to develop a stewardship culture in Japan, many investors remain reluctant to ‘rock the boat’ and default to voting in line with management. The need for Toshiba management to rebuild trust with investors is self-evident and we hope the EGM sends a message that investors expect transparency and trustworthiness. This is the path for a great business like Toshiba to reach its potential and indeed for the wider Japanese markets to be valued fairly.

Accordingly, Farallon encourages all shareholders to support its EGM proposal, and urges shareholders to check with their clearing brokers to determine their specific deadline to ensure that their votes count. Shareholders with questions about Farallon’s proposal or how to vote can contact its advisors, D.F. King, at the following telephone numbers:

For US holders:

  • Richard Grubaugh / 212-493-6950
  • Geoffrey Weinberg / 917-473-2984

For holders outside the US:

  • Eddie Arcari / +44 7892 709 272
  • David Chase Lopes / +33 6 72 54 69 79

For more information, below are links to prior Farallon materials:

More information can be found here: https://farallonmaterials.com/.

About Farallon

Farallon Capital Management, L.L.C., is a global investment firm founded in 1986 and registered as an investment advisor with the United States Securities and Exchange Commission since 1990. Farallon seeks investments across asset classes and around the world through a process of bottom-up fundamental research and analysis emphasizing capital preservation. More information on Farallon is available at www.faralloncapital.com.


This press release is for general information purposes only and is not complete. Under no circumstances is this intended to be, nor should it be construed as an offer, invitation, marketing of services or products, advertisement, inducement or representation of any kind, nor as investment advice or a recommendation to buy or sell any investment products or make any type of investment in securities. This press release should not be construed as legal, tax, investment, financial or other advice. Additionally, this press release should not be construed as an offer to buy any investment in any fund or account managed by Farallon Capital Management L.L.C. or any of its affiliates or representatives (collectively, "Farallon").

This press release should not be construed as soliciting any other Toshiba shareholder to authorize Farallon or any third party to exercise voting rights on such shareholder's behalf with respect to any matter proposed to be presented to shareholders as indicated in the Convocation Notice of the Extraordinary General Meeting of Shareholders. This press release, and the presentation referenced herein, is not intended and should not be considered to solicit, encourage, induce or seek for Toshiba shareholders to authorize Farallon or any other third party as their proxy in exercising their voting rights on their behalf. Farallon is not soliciting or requesting other shareholders of Toshiba to jointly exercise their shareholders' rights with Farallon (including, but not limited to, voting rights). Farallon declares that it does not intend to be treated or deemed a "joint holder" (kyo-do hoyu-sha) under the Japanese Financial Instruments and Exchange Act or a "related person" (kankei-sha) under the Foreign Exchange and Foreign Trade Act with other Toshiba shareholders.

This press release is made available exclusively by Farallon and not by or on behalf of Toshiba or its affiliates or subsidiaries or any other person. Farallon is not an affiliate of Toshiba and neither Farallon nor its principals or representatives are authorized to disseminate any information for or on behalf of Toshiba, and nor does Farallon purport to do so.

1 Slide 13 of Maximizing Value for Toshiba Shareholders, March 1, 2021, http://www.toshiba.co.jp/about/ir/en/stock/pdf/tsm2021e_1.pdf
2 Permission to quote from Glass Lewis or ISS was neither sought nor obtained.
3 https://viewpoint.glasslewis.com/WD/MeetingDetail/?siteId=CalSTRS&securityId=38671
4 “Toshiba CEO Kurumatani Shouldn’t Put Politics and Personal Agenda Before Shareholders,” CorpGov.com, Feb. 7, 2021, https://corpgov.com/toshiba-ceo-kurumatani-shouldnt-put-politics-and-personal-agenda-before-shareholders/
5 “Toshiba again seeks acquisitions after string of deal flops,” Bloomberg, December 18, 2020, https://www.bloomberg.com/news/articles/2020-12-18/toshiba-is-again-seeking-acquisitions-after-string-of-deal-flops
6 “Toshiba's ambiguity on M&As leads to showdown with key shareholder,” Nikkei Asia, February 25, 2021, https://asia.nikkei.com/Business/Technology/Toshiba-s-ambiguity-on-M-As-leads-to-showdown-with-key-shareholder
7 “Toshiba: calls extraordinary meeting amid pressure on investment strategy,” Reuters, February 11, 2021, https://www.reuters.com/article/us-toshiba-results/toshiba-calls-extraordinary-meeting-amid-pressure-on-investment-strategy-idUSKBN2AC091
8 “Toshiba showdown could be a turning point for Japan Inc’s fortunes,” Financial Times, March 14, 2021, https://www.ft.com/content/d2b3c1e7-699e-4c8c-800b-1b26498a7adb

In Japan
Junko Morinaga / Mizuha Matsuka / Shinichiro Ibuski

In the U.S.
Sloane & Company
Dan Zacchei / Joe Germani
dzacchei@sloanepr.com / jgermani@sloanepr.com

ASC Advisors
Steve Bruce / Taylor Ingraham
sbruce@ascadvisors.com / tingraham@ascadvisors.com

Source: Farallon Capital Management, L.L.C.

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