Toshiba will be divided into three independent companies

Toshiba will soon be divided into three companies independent, for which you are going to create paths subsidiaries with its two main divisions. On the one hand, with its energy and infrastructure area, and on the other, with the area dedicated to devices and storage. Both, according to Reuters, will become independent companies of Toshiba, which after the separation will continue to own 40.6% of the shares of the memory chip maker Kioxia, as well as other assets.

The plan for the division has been carried out after a strategic review carried out over five months following a management scandal that has caused severe damage to Toshiba’s reputation. One of its purposes is, in part, to encourage activist shareholders to leave. With the division, the company would go against the requests of some shareholders that Toshiba become a private company, but the committee in charge of the strategic review said that this option had raised internal concerns about its impact on the business and retention of staff.

According to him Toshiba CEO Satoshi Tsunakawa, the company would have chosen the option of dividing regardless of the presence or absence of activist shareholders. In addition, he has assured that the Ministry of Commerce has not objected to the plan. He has also highlighted that «the decision allows each division to significantly improve its approach, and facilitates more agile decision making and a lower cost structure«.

Toshiba hopes to have completed its reorganization for the second half of its fiscal year 2023, and its management says it intends to return $ 875 million to shareholders over its next two fiscal years. It also has plans to monetize its Kioxia shares, returning the entire net proceeds to shareholders as soon as possible. But the company has not given details on whether it is still open for an IPO or whether it would consider other options. Other assets that will continue to be held by Toshiba include its shares in Toshiba Tec Corp, a manufacturer of printing and information systems for retail.

Some Toshiba investors are not convinced that a division will generate value. But it can help end its recurring crises, which began with an accounting scandal in 2015. So far, the last one has led to the ouster of its president over the company’s ties to the Japanese government. In 2017, it obtained an injection of 5.4 billion dollars in cash from more than 30 foreign investors, which helped prevent its expulsion from the stock market, but brought activist shareholders, such as Elliott Management, Third Point or Farallon, to its shareholding. This has led to quite a few tensions between the company’s management and these shareholders, who have sought since their entry to gain more influence over the rest.

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