Makiko Yamazaki

TOKYO (Reuters) – Toshiba (OTC) Corp’s second-largest shareholder, on Wednesday, objected the Japanese conglomerate’s plan to seperate itself into three companies. Instead of soliciting offers from potential buyers it asked for them to reconsider.

The Hedge fund 3D Investment Partners owns over 7% of Toshiba and sent a three page letter to its board. It became the first major shareholder not to support the plan to dissolve the company.

Reuters saw the letter and it highlighted shareholder discontent over Toshiba’s proposal. This is reflected in Toshiba’s recent poor stock performance. It also raises concerns that shareholders may not be able to approve the split-up at a shareholder meeting next year.

It is extremely unlikely that Toshiba’s problems will be solved by the proposed separation, and it would instead create “three underperforming businesses in the image today’s Toshiba”, Singapore-based 3D stated in the letter.

Other hedge fund investors have told Reuters under anonymity that they are disappointed Toshiba turned down their idea to go private.

Toshiba spokespersons stated that the company does not comment on specific exchanges between shareholders.

3D advised Toshiba to open a formal process and develop a compelling plan. It also suggested that Toshiba provide management meetings and detailed diligence materials to all interested parties.

After investors pressured Toshiba to launch its strategic review, Toshiba responded with a strategy review. This was in response to a scandal involving management and Japan’s Trade Ministry. The issue was designed to press foreign shareholders.