The extraordinary Toshiba saga | FT Big Deal

Summary

Toshiba's dramatic saga over the past seven years has involved a series of corporate scandals, business missteps, and strategic setbacks. The company first faced a profit-padding scandal, followed by the collapse of its U.S. nuclear business, and the controversial $18 billion sale of its memory chip division. Amidst intense shareholder pressure, Toshiba's relationship with the government was scrutinized, leading to a failed plan to split the company into three parts. As of 2024, Toshiba is exploring private equity bids to resolve its longstanding issues, highlighting the challenges large Japanese corporations face in addressing deep-rooted obstacles to change.

Takeaways

• 😀 The saga of Toshiba has spanned nearly seven years, marked by extraordinary twists and significant damage to its corporate reputation.
• 😀 Toshiba's first major scandal involved profit-padding, which revealed a toxic internal corporate culture.
• 😀 The collapse of Toshiba's US nuclear business raised serious concerns about the company's financial stability and decision-making history.
• 😀 Toshiba's controversial $18 billion sale of its memory chip business to a private equity-led consortium was a key turning point.
• 😀 The sale of Toshiba's memory chip business led to the creation of Kioxia and became Japan's largest-ever private equity deal.
• 😀 An emergency capital-raising exercise loaded Toshiba's shareholder register with hedge funds and activist investors, bringing more external pressure on the company.
• 😀 Toshiba was forced to probe its own relationship with the government after investors demanded an investigation into potential attempts to influence AGM votes.
• 😀 The company's struggle for stability reached a climax in 2021, when private equity showed interest in taking Toshiba private, leading to the resignation of the CEO and a series of internal conflicts.
• 😀 A strategic review committee was formed, which proposed splitting Toshiba into three parts, but the plan was swiftly abandoned due to investor backlash.
• 😀 In April 2024, Toshiba announced the formation of a special committee to assess potential bids from private equity and other investors, signaling a potential landmark deal to take the company private.
• 😀 The ongoing saga of Toshiba highlights the challenges large Japanese companies face in overcoming long-standing obstacles to change and modernizing their business practices.

Q & A

What was the first major issue Toshiba faced in its saga over the past seven years?

The first major issue was a profit-padding scandal, which exposed a soured internal corporate culture within Toshiba.

What was the significance of Toshiba's US nuclear business collapse?

The collapse of Toshiba's US nuclear business was a key event that revealed deep financial troubles and raised questions about the company's business strategy and dealmaking history.

What happened with Toshiba's memory chip business?

Toshiba sold its memory chip business, now renamed Kioxia, in a controversial $18 billion deal to a consortium led by Bain Capital, marking Japan's largest private equity deal.

How did the issuance of new shares affect Toshiba?

The issuance of new shares as part of an emergency capital-raising exercise led to the influx of hedge funds and activist investors, making Toshiba's shareholder register more volatile than that of any other major Japanese corporation.

What role did activist investors play in Toshiba's corporate governance?

Activist investors pressured Toshiba to investigate its relationship with the Japanese government, particularly alleged attempts to influence key votes during its annual general meetings (AGMs).

What happened in 2021 concerning Toshiba's potential buyout?

In 2021, Toshiba attracted interest from private equity firms to take the company private and resolve its issues. This led to the departure of the CEO and a conflict between investors and management.

What was the outcome of the strategic review committee set up in 2021?

The strategic review committee proposed splitting Toshiba into three parts, but this plan was swiftly abandoned due to strong opposition from investors.

What did Toshiba announce in April after the strategic review failure?

In April, Toshiba announced the creation of a special committee to assess potential bids from private equity and other investors, signaling the possibility of a significant deal to take the company private.

How has the Toshiba saga drawn attention to the challenges of change in large Japanese companies?

The ongoing troubles at Toshiba have drawn unprecedented attention to how large Japanese corporations handle long-standing issues and obstacles to corporate change, highlighting the tension between management and investors.

What was the ultimate impact of Toshiba's tumultuous period on its reputation?

Toshiba's series of scandals and financial troubles have severely damaged its reputation, with each new issue compounding the negative public perception of the company over the years.