Japanese conglomerate Toshiba plans to split into three separate companies, it said this Friday (November 12). The decision follows heightened activity by foreign shareholders to improve governance.
The first Toshiba unit will comprise batteries, buildings, energy, infrastructure engineering; the second holding semiconductors, HDDs, Artificial Intelligence efforts, quantum computing et al. The namesake third unit will be left managing a 40.6% stake in memory chipmaker Kioxia and other assets.
The 146-year-old conglomerate has been embroiled in deep governance issues since 2015, when CEO Hisao Tanaka resigned amid an accounting scandal over $1.2 billion in overstated operating profits.
Toshibal plans to return 100 billion yen ($875 million) to shareholders over the next two financial years and "monetise" its shares in Kioxia, returning the net proceeds in full to shareholders as soon as practicable, it said in an earnings presentation. It did not specify how (IPO, sale, etc.) The move will help it unlock value, tackle supply chain inefficiencies and sharpen strategic focus, CEO Satoshi Tsunakawa said. It hopes to re-list the separated businesses independently by H2 2023.
The company raised $5.4 billion from over 60 foreign investors in 2017, and has faced increasing demands from activist shareholders to enhance its governance; many of whom wanted to see it taken private.
Toshiba was described by the New York Times as "in chaos" this September after a fresh furore this summer that began when US shareholder Elliot forced it to expose its collusion with high-level officials (activity intended by Toshiba to quell persistent shareholder activism). Toshiba Corp shareholders subseqently ousted the chairman of the board in June.
Toshiba's decision will follow similar moves by both Germany's Siemens and the US's General Electric.
Siemens has spun off numerous units in recent years, most recently and substantially its energy business. GE meanwhile said on November 9 it would break into three business, respectively focussed on aviation, healthcare, and energy. (GE described the decision as helping to deliver "deeper operational focus, accountability, and agility; tailored capital allocation decisions in line with distinct strategies and industry-specific dynamics; strategic and financial flexibility to pursue growth opportunities; dedicated boards of directors with deep domain expertise and distinct and compelling investment profiles appealing to broader, deeper investor bases."
Not every Japanese conglomerate has taken the approach that smaller is nimbler and more efficient. Telco giant NTT Corporation in 2019 announced plans to bring together over 30 companies into the UK-based NTT Ltd., with executives highlighting the "the efficiency targets or growth targets we get... out of the [joint] go-to-market and portfolio."
