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Toshiba CEO Kurumatani resigns in wake of $20bn CVC approach

Chairman Satoshi Tsunakawa takes reins at Japanese conglomerate

 Toshiba has announced that Nobuaki Kurumatani will step down from his role as CEO. (File photo by Taro Yokosawa)

TOKYO -- Toshiba said on Wednesday that Nobuaki Kurumatani has resigned as CEO, after three years marked by governance questions and opposition from activist shareholders.

Chairman Satoshi Tsunakawa, who served as the public face of the company, has replaced Kurumatani as CEO, Toshiba said after a board meeting. "The board has accepted Mr. Kurumatani's resignation," the company said.

The sudden move comes a week after Nikkei reported an initial approach to Toshiba from U.K.-based private equity company CVC Capital Partners, expressing interest in a possible $20 billion buyout of the Japanese company.

Before joining Toshiba in 2018, Kurumatani had chaired CVC's Japanese operations, leading to concerns over a potential conflict of interest.

In a news conference on Wednesday Tsunakawa acknowledged pressing urgent tasks, including the possible bid from CVC as well as the company's upcoming annual general meeting, where Toshiba will try to repair relations with a number of investors angered by Kurumatani's stewardship of the company.

"Toshiba is on the threshold of a growth phase and there is no change in our journey to improve corporate value," Tsunakawa said, adding that "I will work hard to build trust with all of our stakeholders."

Toshiba's board chair Osamu Nagayama said Tsunakawa is the best choice as Kurumatani's successor because "he is trusted by shareholders and also has the experience of overcoming difficulties."

Tsunakawa joined Toshiba in 1979 and held positions including vice president before becoming president in 2016 in the wake of the revelation of yearslong accounting improprieties. He became chairman in 2020.

Nagayama denied that Kurumatani's resignation is directly related to his past tenure at CVC, noting that "he resigned due to personal reasons."

Kurumatani was absent from the news conference, but the company shared a message in which he said he contemplated resigning as CEO earlier this year and spoke with his family.

According to the statement, Kurumatani believed Toshiba's return to the top section of the Tokyo Stock Exchange in January marked the completion of his mission to revitalize the company. "I feel a sense of achievement," he said, adding that he wants to "take a break from the intense work to recharge my batteries."

Meanwhile, Nikkei has learned that CVC plans to send Toshiba a detailed buyout proposal within the week and hopes to move forward with the plan despite Kurumatani's departure as CEO.

CVC faces competition, however, as other investment funds, including U.S. private equity firm KKR, are also considering tendering their own takeover bids.

It would be one of the most eyecatching foreign deals for a company considered one of the biggest names in Japan's economy. It would also require government approval given Toshiba's role in Japan's strategic nuclear sectors.

Nikkei has reported that CVC has said it would pay 5,000 yen per share for the engineering conglomerate and delist it from the Tokyo Stock Exchange as early as October. However, Hong Kong-based activist fund Oasis Management this week said in a letter to Toshiba that the company's fair value should be over 6,200 yen per share.

Nagayama said last week that CVC's proposal was "completely unsolicited" with complexities surrounding regulatory transactions.

"It lacks content even as an initial proposal and was abrupt," he reiterated on Wednesday. "We cannot yet evaluate the future detailed proposal but will need to carefully review and consider."

Nagayama said Toshiba will consider establishing an independent committee consisting mainly of outside directors once the company receives a formal proposal from CVC.

Kurumatani joined the industrial group in 2018 as its first outside leader in more than half a century. He was charged with turning the company around from a crisis sparked by Toshiba's 2015 accounting scandal as well as massive losses on U.S. nuclear operations.

Through his three years as CEO, however, Kurumatani has lost support from investors, including activist funds. At the company's annual general meeting in 2020, Kurumatani kept his job with just 57% of the vote, reflecting declining trust in his leadership.

Effissimo Capital Management, Toshiba's largest shareholder with a 9.9% stake, this year called for an independent investigation into allegations that investors of Toshiba were pressured to vote in favor of reappointing Kurumatani, or to abstain from voting, at last year's annual general meeting. Effissimo's proposal was approved at an extraordinary general meeting last month.

More than half of Toshiba's senior managers also expressed a lack of confidence in Kurumatani's leadership in a survey conducted by the board's nominations committee.

Foreign investors own roughly 70% of Toshiba's shares. In 2017 the company decided to raise a total of 600 billion yen in capital from as many as 60 foreign investors to avoid two consecutive years of negative net worth, a situation that would have led to Toshiba's being delisted from the TSE. Tsunakawa was CEO at the time.

Asked how he will deal with activist funds, Tsunakawa said communication will be crucial.

"Shareholders put a lot of emphasis on governance and I would like to change the corporate culture because [Toshiba] needs to reflect on this," he said. "I want to gain the understanding of shareholders not only by talking with them but by also creating policies and implementing them."

In Tokyo, shares in Toshiba jumped following reports that it was on the cusp of a leadership change. The share price rose 5.77% on the day to close at its highest level since April 2015.

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