Toshiba will finally be divided into two parts, and not three as previously announced, something that several of its shareholders did not like. In view of this, Toshiba’s management decided to review its plans, and will finally split in two. One part will be made up of Toshiba and Infrastructure Service Co. The other will be a subsidiary, the result of outsourcing Device Co, as initially planned.
In this latest restructuring, Toshiba and Infrastructure Co. It will be comprised of Toshiba’s power systems, as well as infrastructure systems, development and digital solutions. It will also encompass the actions of Kioxia Holdings Corporation (KHC) which Toshiba owns. Thus, Toshiba Device Co. will stay with the division of storage solutions and electronic devices. Both companies will be public.
The company has stated that the decision to split into two separate companies follows the board’s “thorough review” of its reorganization processes and plans. These plans are designed, moreover, to help achieve sustainable earnings growth, as well as improve shareholder confidence and value, after several months of problems and scandals in the company. Among them, the departure of the company’s President, Osamu Nagayama last June, who was expelled by the shareholders themselves.
Another of the directors, Nobuyuki Kobayashi, who was part of Toshiba’s audit committee, was also ousted during a shareholder vote at the company’s annual general meeting last year. It was the first since an independent, shareholder-approved investigation revealed that the company had colluded with Japanese officials to prevent certain shareholders from exercising their voting rights at the previous annual general meeting.
Nagayama had sent an open letter to the company, expressing deep regret for Toshiba’s conduct and promising to be an agent of positive change. The investigation, carried out by three lawyers, revealed that Toshiba drew up a plan with officials from the Ministry of Economy, Trade and Industry to prevent Effissimo Capital Management, which holds 9.9% of Toshiba shares, from carrying out certain shareholder proposals at Toshiba’s annual general meetings.
After all this, the CEO and Interim President of Toshiba, Satoshi Tsunakawahas pointed out that «After further discussion with key shareholders and completion of additional analysis, we have determined that dividing Toshiba into two separate companies, and divest certain non-critical assets, is in the best long-term interests of our company, as well as its shareholders, customers, partners. business and employees. The redefined strategic reorganization plan creates two distinct companies, well placed to capitalize on their strengths and business cycles. We will be able to achieve these benefits while providing a clearer path to achieving them, reducing their associated costs, and maintaining the tax-free status and deadlines for completing the outsourcing in the second half of fiscal year 2023.«.
Over the next few years, and as part of this plan, Toshiba plans to return some $2.6 billion to shareholders. In addition, the company will sell 55% of its shares in its air conditioning division to a US group for around 870 million dollars.
