Toshiba outlines plans to split into three companies after years of scandals
Toshiba intends to consolidate its energy and infrastructure divisions into one firm, while its hard disc drive and power semiconductor businesses will form the foundation of another. A third will be in charge of Toshiba's holdings in Kioxia Holdings, a flash memory semiconductor firm, and other assets.
FollowToshiba announced plans to split into three entities to placate dissident shareholders who have been pressing for a fundamental revamp of the Japanese giant following years of scandals. Toshiba's dissolution is an unusual step in a country dominated by conglomerates, coming the same week that U.S. industrial heavyweight General Electric declared the end of its vast empire and Johnson & Johnson announced its own.Â
Toshiba, founded in 1875, intends to consolidate its energy and infrastructure divisions into one firm, while its hard disc drive and power semiconductor businesses will form the foundation of another. A third will be in charge of Toshiba's holdings in Kioxia Holdings, a flash memory semiconductor firm, and other assets.Â
According to the business, private equity companies have expressed worries about completing a merger owing to potential issues with Japan's national security law and likely pushback from antitrust regulators. Chief Executive Satoshi Tsunakawa, during a news conference, said after great deliberation, we concluded that this strategic reorganisation was the right solution  He said that Toshiba, which intends to finish the reorganisation in two years, would have broken up regardless of activist shareholders' existence.Â
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Japan's vital commerce ministry had not objected to the proposal. According to a portfolio manager at an activist fund that owns Toshiba stock, the proposal is unsatisfactory and unlikely to be approved at the company's next extraordinary general meeting in March. Since an accounting scandal in 2015, the 146-year-old corporation has lurched from crisis to crisis.
The result of a five-month strategic review launched in the aftermath of a hugely devastating corporate governance crisis, is partially intended to persuade activist shareholders to sell their interests, according to persons familiar with the situation. Two years later, it received a $5.4 billion financial injection from more than 30 offshore investors, avoiding delisting but bringing in activist shareholders such as Elliott Management, Third Point, and Farallon. Since then, the conflict between management and international shareholders has dominated headlines. An explosive shareholder-commissioned study determined in June that Toshiba had coordinated with Japan's trade ministry to prevent investors from gaining influence at the company's annual shareholders meeting last year.
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Earlier on Friday, Toshiba produced an independently commissioned assessment that determined officials, including the company's former CEO, had acted unethically but not unlawfully. It said Toshiba was unduly reliant on the trade ministry.  Toshiba plans to return $875 million to shareholders over the next two fiscal years as part of the restructuring. It expects the upgrade to be completed by March 2024. Toshiba also stated on Friday that its second-quarter operating profit nearly quadrupled to 30.4 billion yen ($267 million) as it rebounded from a dip in the previous quarter.
