Toshiba Plans To Break Itself Up Into Three Units

Toshiba outlines plans to break itself up into three different units after years of governance scandals, but scheme faces challenge from investors

Toshiba plans to break itself up into three separate companies, under newly outlined plans that come in response to years of scandals.

The project, which Toshiba hopes to complete by March 2024, comes only days after industrial conglomerate General Electric also said it plans to split up into separate units.

Toshiba said it will create one unit focused on infrastrucure and another on electronic devices such as power semiconductors.

The third, which is to retain the Toshiba name, is to manage Toshiba’s stake in memory chip maker Kioxa Holdings and other assets.

toshiba, market, investorsBreakup

In recent years Toshiba has sold off assets such as medical devices, personal computers, consumer electronics and its US nuclear power unit, Westinghouse Electric, which declared bankruptcy in 2017.

Toshiba said it plans further asset sales by the separate units, saying private equity companies are interested in buying.

“You may call this a dissolution, but I see it as an evolution to the future,” Toshiba chief executive Satoshi Tsunakawa told a press conference.

He said the plan would make the units more flexible and focused.

Toshiba was hit by a major accounting scandal in 2015 and faced delisting, a crisis that resulted in foreign-based shareholders owning more than half of the company, including activist shareholders such as Elliott Management, Third Point and Farallon.

Activist investors

Those investors are reportedly likely to challenge the plan at an extraordinary general meeting the company plans to hold by next March.

In June a shareholder-commissioned investigation found Toshiba had colluded with Japan’s trade ministry, MITI, to block foreign investors from gaining influence at last year’s shareholders’ meeting.

On Friday Toshiba released a separately commissioned report that found executives had behaved unethically but not illegally, and had displayed “excessive cautiousness” toward foreign funds.

Under its plan Toshiba intends to return 100 billion yen ($875m, £652m) to investors over the next two years.

Kioxa assets

It also said it plans to “monetise” its Kioxa shares, but didn’t indicate whether this meant an IPO or another option.

MITI said it would be interested in how the breakup affects Toshiba’s businesses related to national security, such as radar systems.

Industry watchers were divided over the benefits of a breakup, with Fumio Matsumoto, chief strategist at Okasan Securities, saying it would create “three lacklustre midsize companies”, while Rakuten Securities strategist Masayuki Kubota said the move would allow the 146-year-old conglomerate to rebuild its governance.