Toshiba CEO’s sudden resignation throws $20bn CVC deal into doubt


The chair of Toshiba’s board cast doubt on CVC’s proposed $20bn buyout on Wednesday as the Japanese conglomerate confirmed the sudden resignation of its chief executive.

The departure of Nobuaki Kurumatani follows an unprecedented shareholder rebellion, management’s defeat in a high-profile clash with activist funds and signs of a significant split on the Toshiba board over the approach made by CVC Capital Partners and other private equity funds.

The submission of CVC’s preliminary proposal last week raised the possibility of Toshiba being taken private in what would be Japan’s biggest leveraged buyout. Although one person close to the Toshiba board said the CVC proposal “looked absolutely serious” and contained an appropriate level of detail, attention has focused on Kurumatani’s previous role as CVC’s head of Japan and the presence of a senior adviser to the European buyout group on the conglomerate’s board.

“CVC claims it will submit a more detailed proposal, but it is impossible to evaluate the proposal at this point,” Osamu Nagayama, Toshiba’s chair of the board, said at an online news conference. “The initial proposal notes that the management will be maintained. With Mr Kurumatani resigning, we don’t know what their thinking is now.”

A person close to the Luxembourg-based fund added that there was no clarity about “CVC’s next move”. 

Atsushi Akaike, the head of CVC in Japan, was not immediately available for comment.

Despite the turmoil at Toshiba, shares in the company rose as much as 8 per cent on Wednesday to reach their highest level since April 2015, just before the company was caught in a massive accounting scandal that began six years of reputational and financial crises. 

Investors said the share price would remain strong on the prospect of Toshiba being “in play” as a potential buyout target, with expectations high that KKR and others might enter higher bids than CVC in the coming weeks.

Toshiba’s board said it had appointed Satoshi Tsunakawa to replace Kurumatani. Tsunakawa, who was also Kuramatani’s immediate predecessor, made the decision in 2018 to issue $5.4bn worth of new shares in a move that stuffed the register of one of Japan’s most famous companies with aggressive foreign shareholders.

Nagayama sought to deny that Kurutamatani’s resignation followed a boardroom coup triggered by opposition to CVC’s bid, claiming personal reasons were behind the decision to step down. In a statement read out at the news conference, Kurumatani said he wanted to spend more time with his family after “completing” his mission to revive Toshiba. 

Both Tsunakawa and Nagayama made multiple references to Toshiba’s “successful” return to the first section of the Tokyo Stock Exchange in February after its three-and-a-half-year demotion to the second section as punishment for its accounting scandal. The return was made possible by a historic change in the TSE rules.

According to several people close to the company, the chair belonged to factions within Toshiba who were unhappy with the way Kurumatani was managing the company and dealing with activists.

Tsunakawa, 65, said he would work to build “favourable ties” with the company’s activist investors and aimed to hand over the chief executive role to the younger generation in the near future.

China considers mixing vaccines to bolster efficacy


China’s Center for Disease Control is thinking about mixing vaccines and varying the sequence of doses to boost efficacy. It is the first time a government body has discussed publicly that there are concerns over the effectiveness of Chinese jabs.

Gao Fu, the CDC head, told a forum on Saturday that the agency was “considering how to solve the problem that the efficacy of existing vaccines is not high”, according to local media.

In a now unavailable Weibo social-media post, the influential “Vaccines and Science” account said Gao’s comments were “very candid”. But it also reminded readers that taking the jab was still important for protecting the country. It added that “we can’t wait for vaccines to become perfect before getting vaccinated”.

Gao proposed mixing different vaccines as well as amending the sequence of doses, such as changing the number and quantity of doses, and the interval between them.

Some of the WeChat social-media posts on Gao’s remarks were swiftly censored, according to Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations.

“It is the first time . . . a government official publicly admitted that the protection rate is a concern in the vaccination drive,” Huang added.

China had administered 65m doses across the country by the middle of March.

Unlike other vaccine producers, China’s manufacturers have not published their phase 3 trial data, leading to accusations of a lack of transparency over their effects on different groups.

Any new strategy will have ramifications for the more than 20 countries that China said it was supplying jabs to in mostly bilateral “vaccine diplomacy” deals. As of March, China had supplied 40m doses abroad.

Chile is facing another Covid wave from new variants, despite a successful rollout of China’s Sinovac vaccine. The efficacy of one jab was only 3 per cent, compared with 56 per cent with two shots. Experts, however, have not linked the latest wave to the vaccine’s efficacy rate.

Vaccine makers in other countries have conducted dosage experiments, too. In the UK, Oxford/AstraZeneca researchers stumbled upon the efficacy of lowering the initial dose after a dosing error.

Gao also suggested mixing different vaccines. For now, the only jabs approved for use in China are the traditional “inactivated virus” vaccines produced by Sinopharm, Sinovac and other domestic groups, which are similar in mechanism to Oxford/AstraZeneca.

Sinopharm claims a 79 per cent efficacy rate, similar to the rates recently achieved by AstraZeneca in its US trials. However, while AstraZeneca revised down its rates after facing criticism for releasing incomplete data, neither Sinopharm nor any of its Chinese peers have released phase 3 data for public scrutiny.

Sinovac Biotech’s CoronaVac vaccine has an overall efficacy rate of 50.66 per cent among people aged between 18 and 60 years old, according to documents published by a Hong Kong panel of experts.

However, CoronaVac phase 1 and 2 data published in the Lancet found the shots were “safe and well tolerated”.

Gao also warned that reopening China’s borders to foreigners, who have been barred from entering the country since March last year, posed a risk to elderly people, who have not yet been vaccinated.

The timing of relaxing border restrictions will affect attendees at Beijing’s Winter Olympics in February 2022.

Anglo-American to demerge South African coal assets


Anglo-American is to transfer its South African thermal coal assets into a new company, in a move to exit the polluting resource amid growing investor pressure.

The demerged company, Thungela, will list on the Johannesburg and London stock exchanges, Anglo-American said on Thursday. Thungela produced 16.5m tonnes of coal last year and has assets worth $1.3bn.

“As the world transitions towards a low-carbon economy, we must continue to act responsibly,” said Mark Cutifani, Anglo-American’s chief executive. “Our proposed demerger of what are precious natural resources for South Africa allows us to do exactly that.”

Mining companies have been under pressure to divest from coal mines. Rio Tinto sold its last coal mine in 2018 and BHP is also looking to exit its thermal coal business.

Anglo-American investors will each receive one share in Thungela for every 10 Anglo-American shares they hold, the company said.

South Korea’s LG to exit global smartphone business


South Korea’s LG Electronics will close its lossmaking smartphone business after years of struggling to compete against rivals ranging from Apple to low-cost Chinese upstarts.

The Seoul-based group announced on Monday that it would formally exit the industry and instead focus on growth areas such as vehicle components.

LG has lost ground in smartphones as the global market has become more saturated. It has also faced pressure from cheaper Chinese competitors in the low-to-mid end segment while being outmanoeuvred by Apple and local rival Samsung Electronics in the premium part of the market.

The company’s mobile phone business has posted cumulative losses of nearly $4.5bn over the past five years, with its global market share falling to about 2 per cent, according to research provider Counterpoint. The business reported Won5.2tn ($4.6bn) of sales last year, or 8.2 per cent of LG’s total revenues.

“We will end production and sales of the mobile phone business due to its continued slump amid stiffer competition,” the company said in a regulatory filing. “We will improve our business portfolio by efficiently focusing our resources on core areas.”

The company added that its withdrawal from smartphones would improve its competitiveness and financial status in the long term, although the decision could dent short-term sales.

LG was a big player in the global mobile phone market prior to the emergence of feature-laden smartphones, where it was a latecomer.

Investors had called for the company to wind down the smartphone business, arguing that it represented a misallocation of resources that weighed on LG’s stock market valuation, despite robust sales of premium home appliances and televisions.

“Being late is always better than never,” said Daniel Kim, an analyst at Macquarie, of LG’s decision to retire from the sector. “It entered the smartphone market too late and couldn’t scale up amid stiff competition in the saturated market.”

LG’s fortunes in the smartphone market stand in sharp contrast to Korean adversary Samsung, which has surged into pole position globally. LG shipped 23m phones last year compared with 256m for Samsung, according to Counterpoint.

LG has dropped out of the global top seven players by market share as successive failures of its flagship smartphones have cost it ground against fast-rising Chinese groups such as Huawei, Xiaomi and Oppo.

But it had remained the third-largest smartphone maker in North America and the fifth-largest player in Latin America by market share.

The company is expected to shift more of its resources towards the fast-growing electric vehicle components business, taking advantage of its ties with affiliates including battery leader LG Energy Solution, display maker LG Display and camera module supplier LG Innotek. The company plans to launch a joint venture with automotive supplier Magna International in July to make components for electric vehicles.

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Taiwan train derailment kills at least 36 and injures scores more


A train crash in eastern Taiwan has killed dozens of people, in what could be the country’s worst rail disaster in decades.

At least 36 people were dead and 44 injured, the transportation ministry said. The fire department said the number of casualties was likely to increase.

The train, which was carrying 350 people and was travelling from Taipei to the south-eastern city of Taitung, derailed on Friday morning close to Qingshui, a scenic stretch of coastline where marble cliffs drop into the Pacific Ocean.

The government said the crash was believed to have been caused by a construction vehicle that dropped from the highway on to the tracks. The train was derailed after colliding with the vehicle, and then hit the wall of the tunnel.

The first four of the train’s eight carriages were deformed and half of the driver’s cabin was sliced off, according to the transportation ministry and local media accounts. It took rescue workers until noon to gain access to the train.

The crash occurred on the first day of a four-day holiday that is typically a busy travel period. Many Taipei residents travel to the east, a popular tourist destination, and people based in the area return home.

Footage from the site broadcast on local television showed passengers making their way on foot along the rail tracks.

In 2018, a rail crash in north-eastern Taiwan killed 18 people and injured 175.

Eastern Taiwan is blocked off from the rest of the island by towering mountain ranges. The area where the crash occurred is known for hazardous traffic conditions. The only road linking the main eastern city of Hualien to the north of the island passes the sheer cliffs with narrow curves in several places.

A year ago, an improved road circumventing some of the most dangerous sections with tunnels was opened. Because of frequent rockfalls, the old road also requires almost constant repair work.