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.