Toshiba Machine awaiting approval for its poison pill defense

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Toshiba Machine will seek shareholder approval for its poison pill defense, as demanded by activist investor Yoshiaki Murakami. The move follows a threat by the company to protect itself if Murakami’s takeover proposal does not respect a 60-day study period.

Despite this, Murakami-backed fund City Index Eleventh announced its 25.9 billion yen ($235 million) hostile bid the same day. The activist offered 3,456 yen per Toshiba Machine share to buy up to 43.8% of the former subsidiary of Japanese conglomerate Toshiba. The proposal represents an 11% premium over the company’s closing price on the day Murakami’s intentions were disclosed.

Toshiba Machine bid

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Q4 2019 hedge fund letters, conferences and more

Murakami said Toshiba Machine’s plan to adopt a poison pill without shareholder approval would be "unacceptable" and urged the company to convene a special meeting for this purpose on pain of a lawsuit.

The activist claimed Toshiba Machine’s management failed to deliver an expected level of performance and drive up shareholder value. Murakami said the firm’s recent decision to tender its 16% stake in NuFlare Technology to technology giant Toshiba was not the best option to maximize returns as the semiconductor manufacturer previously received a higher offer from a rival bidder.

What We'll Be Watching For This Week

  • Will Verso shareholders vote in favor of the board nominees advanced by activists Atlas and Blue Wolf at the meeting on Friday?
  • Will the Detour-Kirkland merger be approved today?
  • How will shareholders at Shaftesbury vote on the re-election of the company’s top echelon at Friday's meeting?

Activist Shorts Update

David Einhorn’s Greenlight Capital increased its short bet on Netflix, arguing the streaming video service will have a difficult time maintaining its momentum because of mounting debt and an increasingly competitive landscape. The investor’s negative views on the streaming giant’s earnings prospects are based on the company’s cash burn and "heavy" debt load, and more recently on the news that major firms like Disney and Apple are entering the streaming market.

"Netflix is no longer the only value-priced streaming VOD provider. There are now a half-dozen subscription services and in the coming year there will be additional credible entrants with deep content libraries," Einhorn wrote. "Not every customer will choose to subscribe to all services, and on the margin, substitution will occur," he added.

Einhorn’s fund enjoyed the 28% drop in Netflix’s share price that took place between July and September, which in turn contributed to the fund’s investment returns. And Greenlight’s assessment gained some credibility when Netflix reported disappointing subscriber figures in the U.S. for the fourth quarter.

However, Netflix’s shares have rebounded sharply on better than expected earnings, and are up a little under 35% since their nadir in late September.

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CHART OF THE WEEK

The number of board seats won by activists through settlements at Asia-based companies.

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About the Author

ActivistInsight
Since 2012, Activist Insight has provided its diverse range of clients with the most comprehensive information on activist investing worldwide. Founded by Nick Arnott and Kerry Pogue with the objective of providing unmatched intelligence to professionals in the global activist investment space, Activist Insight made its entry into the market with online information product, Activist Insight Online. Activist Insight Monthly, the world’s only monthly magazine dedicated to shareholder activism, soon followed, granting its readership access to the thoughts and opinions of key industry professionals, while providing an editorial vehicle for the data trends uniquely aggregated from Activist Insight Online. In 2013, Activist Insight’s sister business, Proxy Insight, was co-founded by Nick Dawson and Nick Arnott.

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