Toshiba Possibly Splitting Into Three Companies
Embattled Japanese conglomerate Toshiba is considering splitting its business into three different companies according to reports.
Hounded by scandals that came to light as far back as 2015, Toshiba has since faced challenges one after another and is now seeking to rebuild its market value and finally address stakeholders’ demands.
In June this year, Toshiba shareholders ousted chairman Osamu Nagayama in a surprise decision and appointed Satoshi Tsunakawa as interim chairman. The ouster was a rare victory for activist shareholders in Japan and was prompted by damaging revelations from an independent report that revealed Toshiba’s attempt to limit shareholders’ rights. According to the independent report, the company went as far as pursuing an intervention from Japan’s Ministry of Economy, Trade and Industry in the hopes of gaining a board vote.
Last April, the company was considering an offer from CVC Capital Partners, a private equity fund, which was a deal that could have been worth around US$20 billion.
The buyout offer would take Toshiba private, delisting it for faster decision making from Toshiba’s management, which hasn’t been seeing eye to eye with its shareholders. The controversial buyout offer sparked uproar among activist investors with then-CEO Nobuaki Kurumatani resigning in the same month. He insisted he has nothing to do with the buyout controversy and other offers have also emerged.
Since its major accounting scandal in 2015 wherein more than JPY200 billion worth of padded profits were uncovered, Toshiba has continued to experience drawbacks. The company was also badly hit in 2017 due to losses incurred by its U.S. nuclear power plant business. In 2020, a subsidiary of the company, Toshiba IT-Services Corp. in Kawasaki was reported by The Japan Times to have been suspected of booking JPY43.5 billion worth of sales in 26 transactions that were only recorded on paper.
These have prompted big shakeups in the company which include the proposed move, eyed for 2023. This is just one of the proposals made by investors. According to a Nikkei Daily report, based on the proposal, the three companies which Toshiba is expected to be divided into will include a devices company, an infrastructure group and a semiconductor memory business.
All three businesses are expected to be listed and the proposal may likely be announced this Friday during Toshiba’s mid-term business plan, said the Nikkei Daily. It notes that such a move has led to positive effects for some companies in the U.S. like Hewlett Packard.
"We are drafting a mid-term business plan to enhance our corporate value, and dividing our businesses is one of the options, but there is nothing officially decided at this point," Toshiba spokesman Tatsuro Oishi told AFP.
He added, "We will swiftly announce if we decide anything that should be disclosed."
Nikkei said that the proposed split is rare in Japan and if finalized, Toshiba will be the first major conglomerate to undergo this change, prompting the end for Japanese conglomerates with several businesses that complement each other under one company.
Written by Abby Rebong