Toshiba Corp. is splitting into two standalone companies, the electronics maker stated on Feb. 7, after previously announcing its intention to separate into three companies.
The two independent companies, both of which will be publicly traded, will be made up of Toshiba Infrastructure Service, which covers energy, transportation, batteries, and other areas; in addition to Toshiba’s ownership stake in Kioxia Holdings Corp., and Device Co., which covers digital devices, semiconductors, and storage.
If approved, the restructuring will be completed by the second half of fiscal year 2023.
Toshiba stated that the decision to separate into two companies is the “result of the Toshiba Board of Directors’ continued and thorough review of the strategic reorganization plan and process, as well as the Company’s extensive engagement with shareholders, regulators, and other stakeholders.”
It also noted that the company believes that this decision is the fastest and most effective way to deliver sustainable profitable growth and enhance shareholder value.
Toshiba stated that it has designated Toshiba Tec Corp., its listed electronic equipment business, as a non-core business and will work with Toshiba Tec in the short term to “facilitate Toshiba Tec’s own mid- to long-term business plan following this designation.”
The Japanese company has also agreed to sell its joint venture stake in Toshiba Carrier Corp. to the U.S.-based Carrier Group for approximately 100 billion yen ($869 million).
It’s also “moving forward with divestiture plans” for Toshiba Elevator and Building Systems Corp. and Toshiba Lighting & Technology Corp., it stated on Feb. 7.
Over the coming years, Toshiba plans to return 300 billion yen (roughly $2.6 billion) to shareholders as part of the plan, which is still subject to shareholder and regulatory approval.
The move came following years of scandals, including revelations that Toshiba had colluded with Japan’s trade ministry to block investors from gaining influence at the 2021 shareholder’s meeting, and a 2015 accounting scandal.
However, that plan was met with fierce opposition from shareholders, including Toshiba’s second-largest investor, Singapore fund 3D Investment Partner.
In an open letter in January, 3D Investment branded the process behind the plan as “flawed” and stated that the recommendation was therefore “not reliable.”
On Feb. 7, Satoshi Tsunakawa, interim chairperson, president, and CEO of Toshiba, said the decision came after “engaging with key stakeholders and completing the additional analysis.”
The separation, along with divesting certain non-core assets, is in the “best long-term interests of our company and its shareholders, customers, business partners, and employees,” according to Tsunakawa.
“The refined strategic reorganization plan creates two distinctive companies that are well-positioned to take advantage of their unique strengths and business cycles,” he said. “We will be able to deliver these benefits while providing a clearer path to completion, reducing the associated costs, maintaining tax-free status, and keeping to our stated timeframe of completing the spin-off in the second half of FY2023.”
However, Tsunakawa denied that the separation was prompted by pressure from shareholders.
“We have not changed the plan to avoid confrontation with shareholders,” he told a briefing, according to Reuters.
Paul J. Brough, independent director and chairperson of Toshiba’s Strategic Review Committee, noted that stakeholder feedback is “an important part of any strategic process.”
“The refinement of the separation plan reflects the open and robust conversations we have had with shareholders and other relevant parties,” Brough said.
Shares of Toshiba rose after the announcement and were trading 0.98 percent higher on Feb. 7 at $20.78.
Friends Read Free