San Francisco Frontiers - Toshiba holds key shareholder vote on spin-off plan

The ballot on the proposal to spin off Toshiba's electronic devices segment is meant to confirm support ahead of a binding resolution vote next year.

But success for the management's plan at Thursday's extraordinary shareholder meeting is far from guaranteed.

A vote to nix the spin-off would be another setback for the engineering giant and a rare victory for activist shareholders in corporate Japan.

Toshiba, once a symbol of the country's tech and business prowess, has faced a series of scandals, financial troubles and shock high-level resignations in recent years.

The plan to divide in two was revised from an earlier idea for a three-way split, which also met stiff opposition from some investors.

Several major shareholders argue that a spin-off will only add to Toshiba's woes by creating more managerial posts at smaller units, rather than improving the firm's governance.

And some want a buyout instead, following an abandoned take-over offer last year from private equity fund CVC Capital Partners.

Singapore-based Effissimo Capital Management, which owns 10 percent of Toshiba's shares, said it would dismiss the spin-off proposal.

3D Investment Partners, another key shareholder, urged Toshiba to explore alternatives including going private, and Farallon Capital Management said a buyout would "put an end to the spiral of mistrust and reposition the company for the future".

Satoshi Tsunakawa, a key figure behind the spin-off proposal, abruptly stepped down as CEO earlier this month after a brief tenure of less than a year. He was replaced by Taro Shimada, who also backs the two-way split.

The shareholder meeting begins at 10am in Tokyo, with news of the vote's outcome expected several hours later.

Foreign investors have kept Toshiba afloat, but have also pushed for faster growth and a clearer long-term strategy.

Travis Lundy, an analyst at Quiddity Advisors who publishes on Smartkarma, told AFP that Toshiba's "number one goal" is to "get rid of the activists, make them go away".

"The problem is... that activists have a certain mandate," he said.

"They need to get out with a win. Otherwise, at this point, it would be getting out with a loss, because they've been there for years now."

I.Sanders--SFF