$18 Billion Electronics Giant Faces Turbulence as Toshiba CEO Resigns

(Bloomberg) -- Toshiba Corp.'s Chief Executive Officer Satoshi Tsunakawa resigned Tuesday in the latest turbulent move at the Japanese firm, with his replacement pledging to move forward with a plan to split the company in two despite opposition from some investors.

Tsunakawa will be replaced on an interim basis by senior executive Taro Shimada. The former CEO will remain as chairman of the board of the directors.

Speaking in Tokyo, Shimada pledged to strengthen ties with shareholders, workers and other stakeholders.

But he put his support behind the plan to divide into two companies, despite earlier reports that the new management could review the controversial proposal.

Activist investors have called for the company to review other options, including a potential sale to private equity. Management has been reluctant to pursue that path, with Tsunakawa saying in an interview that going private was full of risks that would be “impossible” to ignore.

Shimada said the company isn't considering canceling the plan to split or going private.

Last month, Toshiba scrapped its proposal to divide into three listed companies and switched to a plan to split into two instead.

The company will hold a shareholder meeting on March 24 to gauge investor support for its revised plan.

“Some shareholders voiced concerns that it's difficult to vote on the two-way split plan without knowing who will be the leader taking the initiative,” Tsunakawa said at the briefing. “Today's announcement is a result of the appointment committee moving swiftly to address that point.”

Toshiba shares closed 2.4% higher in Tokyo, having pared earlier gains.

Toshiba CEO Says Going Private Too Risky as Activists Seek Sale

Investors have been cool on both proposals to split, with shares still trading below the level before the first split proposal was unveiled last year. 3D Investment Partners Pte, the Japanese company's second-largest shareholder, has called on the company to reopen negotiations with private equity firms.

Nikkei BP reported last week that Toshiba received an early takeover offer from Blackstone Inc., which was strenuously denied by both sides.

In the interview with Bloomberg Television, Tsunakawa voiced opposition to going private, saying that Toshiba would lose orders from utilities and local governments and would be forced to sell sensitive technology in areas such as nuclear, defense and cybersecurity.

Shimada, 55, was hired from Siemens AG to lead Toshiba's digital strategy in 2018. He was personally approached to join the company by Tsunakawa's predecessor, Nobuaki Kurumatani, who had formerly worked at private equity firm CVC Capital Partners.