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Toshiba shareholders to endorse director nominees as buyout expectations grow

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The logo of Toshiba Corp. is displayed atop of the company's facility building in Kawasaki, Japan
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By Makiko Yamazaki

TOKYO (Reuters) - Toshiba Corp's shareholders are expected to endorse all proposed directors, including two from its hedge fund investors, on Tuesday in a move that could mark a crossroads for the 146-year-old Japanese conglomerate and hasten a potential buyout.

The company has nominated executives from Elliott Management and Farallon Capital Management for approval as outside directors at its annual general meeting, a move designed to end a long-running battle between the company and activist investors.

Influential proxy advisers Institutional Shareholder Services Inc (ISS) and Glass Lewis have both recommended voting for their appointments.

But the proposal has not been without hitches - and critics. External director Mariko Watahiki, a former high court judge, has objected to the candidates put forward by Elliott and Farallon, saying the pair's presence on the board would skew it toward activist investors.

Several domestic asset managers who own Toshiba shares told Reuters they agree with Watahiki's view. "The scope of those shareholders (Elliott and Farallon) is probably much narrower than ours," said one, referring to the funds' interest in supporting a buyout over a longer-term strategic approach.

However, Watahiki's objection is unlikely to amass support to reject the nominations, a person familiar with the matter said, speaking - like the asset managers - on condition of anonymity because the matter was private.

The board nominations are among signs that Toshiba, which has been exploring strategic options after shareholders voted down a restructuring plan, has become more receptive to the idea of being taken private, say hedge fund shareholders.

The shareholder representatives are expected to join the board's special committee in charge of an ongoing strategic review, Toshiba has said. If they are voted in, attention would then turn to whether director Watahiki, who serves on the committee, would retain that role.

Toshiba said this month it had received eight initial buyout proposals as well as two proposals for capital alliances that would see it remain listed.

Reuters reported that the bidders are considering offering up to 7,000 yen ($51.84) per share to take the company private, valuing the deal at up to $22 billion, although the pricing range was wide and various conditions have been attached.

Toshiba's shares closed at 5,707 yen on Monday, giving it a market value of $18 billion, having risen 21% since the start of the year.

($1 = 135.0400 yen)

(Reporting by Makiko Yamazaki; Editing by Kenneth Maxwell)