Exclusive-Toshiba to propose Elliott, Farallon executives join its board, sources says

By Makiko Yamazaki

TOKYO (Reuters) -Toshiba Corp plans to propose giving two of its major hedge fund shareholders seats on its board, people familiar with the matter said, a move that could give foreign investors more influence over the troubled Japanese conglomerate.

Toshiba plans to nominate executives from Elliott Management and Farallon Capital Management for board seats ahead of its annual shareholder meeting in June, said the people, who declined to be identified because the matter has not been made public.

Three of the people said Toshiba would propose an Elliott executive, and two of them said it would also propose one from Farallon.

The move could mark a turning point in a long battle between Toshiba's management and its activist shareholders.

A Toshiba spokesperson said the company hadn't finalised its board director nominees, adding it would disclose its decisions promptly once they had been made.

Farallon, Toshiba's third-largest shareholder with a stake of more than 6%, and Elliott, which sources say owns just under 5% of Toshiba, didn't immediately respond to requests for comment.

Toshiba has delayed board director nominations, saying it is trying to ascertain whether there are any conflicts of interest for some candidates.

Bringing activist shareholders onto a board is relatively rare in Japan.

But this is slowly changing. In 2019, Olympus Corp brought a ValueAct Capital partner onto its board as the medical equipment firm saw the San Francisco-based fund as a potential catalyst for change at the firm, which was reeling from an accounting scandal.

Greater influence for hedge fund shareholders could also raise the chance of a deal to take Toshiba private.

Farallon said in March it believed taking Toshiba private would maximise value for shareholders and was the only solution for Toshiba to fix its governance, capital allocation issues, and the deep mistrust among its shareholders.

Toshiba, which has since 2015 been bedevilled by accounting and governance crises, set up a special committee last month to explore strategic options, including potential deals to go private, after shareholders voted down a management-backed restructuring plan.

It said 10 potential investors had signed confidentiality pledges, without identifying them.

(Reporting by Makiko Yamazaki Editing by David Dolan and Mark Potter)

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