Japan’s Toshiba To Split Into Three Firms

The logo of Japanese industrial group Toshiba is seen on top of a building at its headquarters in Tokyo on November 12, 2021. Kazuhiro NOGI / AFP

Storied Japanese conglomerate Toshiba will split into three companies, it said Friday, following a campaign by investors to boost the firm’s shares after a period of enormous upheaval.

The board approved a plan that will spin two companies off from the rest of Toshiba’s operations within two years, with one focused on infrastructure and the second on devices, and both eventually being listed.

The firm said the decision would allow each business to “significantly increase its focus and facilitate more agile decision-making and leaner cost structures”.

That would leave them “much better positioned to capitalise on their distinct market positions, priorities and growth drivers to deliver sustainable profitable growth and enhanced shareholder value”, it added.

The decision, reported in Japanese media earlier this week, followed calls by activist investors who wanted “moves to shake the company up and get investors to reevaluate it and hopefully get a higher share price”, said LightStream Research analyst Mio Kato, who publishes on Smartkarma.

The decision caps a period of tumult at the firm, once a symbol of Japan’s advanced technological and economic power.

In June, shareholders voted to oust the board’s chairman after a series of scandals and losses, in a rare victory for activist investors in corporate Japan.

The move followed the damaging revelations of an independent probe that concluded Toshiba attempted to block shareholders from exercising their proposal and voting rights.

It also detailed how the firm had pursued an intervention from Japan’s Ministry of Economy, Trade, and Industry to help sway a board vote.

And in April an unexpected buyout offer from a private equity fund associated with then-CEO Nobuaki Kurumatani stirred uproar, with allegations it was intended to blunt the influence of activist investors.

Other offers emerged subsequently, and Kurumatani resigned in April, though he insisted it was not related to the buyout controversy.

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Investors ‘Not Willing to Wait’ 

The logo of Japanese industrial group Toshiba (R) is seen on top of a building at its headquarters in Tokyo on November 12, 2021. Kazuhiro NOGI / AFP

Hideki Yasuda, an analyst with Ace Research Institute, said it would take time to assess the consequences of the split.

“Corporate value is maximised by individual segments working on their own, so the plan is a good one if you look at that aspect of it,” he told AFP.

“Another way to look at it is that the three entities, which had organic business coordination, will be divided… It’s conceivable that in reality their efficiency might decline as a whole,” he said.

The move risks failing to address issues facing Toshiba including governance reform, said Kato, with management focused on responding to investor pressure instead.

“I think you still need probably another three, four years to really put Toshiba where it should be but I don’t think they’re willing to wait,” he said.

The firm’s shares ended the day 1.32 percent down at 4,872 yen, having fallen as much as 3.6 percent earlier in the day.

Toshiba said the move was the first-ever spin-off scheme for a Japanese company of its size, and Yasuda said it would be closely watched in the country, with its success or failure likely to influence others.

“If it ends well, I think shareholder pressure may increase for other conglomerates to take similar steps. But if it fails, then business managers may feel that being conglomerates reduces risks.”


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