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Japanese Toshiba shareholders reject restructuring plan

TOKYO – Shareholders of Japanese electronics and energy giant Toshiba Corp. on Thursday rejected a major restructuring plan, in a setback for the company’s management.

The plan proposed last month saw Tokyo-based Toshiba Corp split into two companies, one focused on infrastructure and the other on devices. The latter would have been swarmed.

Some shareholders, including foreign investment funds and US proxy advisory firm Institutional Shareholders Services, opposed the plan.

Toshiba management had abandoned an earlier proposal for a three-way split and presented the latest plan, which was put to a vote at Thursday’s extraordinary general meeting.

This new plan failed to win a majority of votes, in a huge setback for Toshiba management, which had championed the new plan as less expensive and more stable. A senior executive called the move a “last chance” for the company to consolidate its brand power and regain people’s trust.

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Shareholders also rejected a proposal from Singapore-based major shareholder 3D Investment Partners, calling for a fuller objective review of strategic alternatives, including a takeover.

During the meeting, shareholders, including several who identified themselves as former Toshiba workers, stood up and said the restructuring plan was not in the best interests of Toshiba or its employees. Others said that splitting a company would not produce value.

Toshiba management had defended the new plan as less expensive and more stable than possible alternatives.

Toshiba’s fortunes have plummeted since the Fukushima nuclear disaster in March 2011, when a tsunami in northeast Japan blew up three reactors. Toshiba is involved in the costly and precarious dismantling effort, which will take decades.

The company’s reputation was also tarnished by an accounting scandal, involving books that had been doctored for years.

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The company also experienced managerial upheavals. Last year, Nobuaki Kurumatani abruptly resigned as president of Toshiba. Kurumatani had led the Japanese operations of global fund CVC Capital Partners before joining Toshiba in 2018.

Kurumatani was replaced by Toshiba veteran Satoshi Tsunakawa, who served as chief executive from 2016. Tsunakawa recently announced his resignation, although he remained chairman.

Taro Shimada, the company’s general manager and senior vice president, has been named interim president. Shimada was an executive at Siemens, in Japan and the United States, before joining Toshiba’s digital operations in 2018.

If approved at a general meeting of shareholders in June, Shimada will become Toshiba’s first chief executive with a background in digital technology.

“We will consider shareholders’ opinions and continue to explore how we can increase the value of our business,” Shimada told shareholders Thursday.

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Founded in 1875, Toshiba was a pioneer in manufacturing everything from electric rice cookers to laptop computers. He also invented flash memory, but that division was sold off as his fortunes plummeted.

Toshiba acquired Westinghouse in the United States in 2006 to much fanfare, making nuclear power a key part of its business. Westinghouse went bankrupt in 2017, sealing Toshiba with huge red ink at the time. Toshiba sold Westinghouse in 2018.

Toshiba shares, which have rallied in price over the past five years, edged higher in morning trading.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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