Daily Management Review

Toshiba Aims To Get Divided Into Two, Increases Return Targets For Shareholders


Toshiba Corp said it now plans to split into two firms rather than three, and it also announced a significant increase in projected shareholder distributions in a bid to pacify enraged shareholders.
Foreign hedge funds, many of which have been opposed to any form of separation and would prefer that the scandal-plagued Japanese giant be taken private, are expected to oppose the new plan.
Toshiba's device division, which includes its power chip section, will be split off under the new reorganization. It had previously planned to split into three companies: one for energy and infrastructure, another for devices, and yet another for flash memory chips.
Toshiba also plans to boost shareholder returns to 300 billion yen ($2.6 billion) over the next two years, up from a target of 100 billion yen previously.
Following the news, shares of the industrial group closed 1.6 per cent higher.
Toshiba claimed that the new restructuring plan was simpler, would save money, and would make it easier to explore strategic relationships.
"We have not changed the plan to avoid confrontation with shareholders," CEO Satoshi Tsunakawa told a briefing.
He said the revised restructure would be submitted to a vote of shareholders at an extraordinary general meeting in March, with a 50 percent approval requirement.
Some investors believe the new plan is being put in place to allow Toshiba to avoid a shareholder vote that would have required two-thirds support.
When the plan was first revealed on Friday, a top-15 shareholder official, who did not want to be identified, told Reuters that he believed management had revised the plan to "fit themselves."
When the book value of the assets being spun off accounts for more than a fifth of the total assets, legal experts believe breakups require the support of two-thirds of shareholders.
Toshiba claims that under newly changed legislation, even a three-way split would not require two-thirds approval. Toshiba has had a tumultuous relationship with its foreign shareholders, who collectively comprise over 30% of the corporation.
Toshiba collaborated with Japan's trade ministry, which views Toshiba as a vital asset due to its nuclear reactor and defense expertise, to prevent foreign investors from gaining power at its 2020 shareholders meeting, according to a shareholder-commissioned probe released last year.
Toshiba also announced on Monday that it intends to sell its elevator and lighting businesses and that Toshiba Tec Corp, which develops point-of-sale systems and copiers, is no longer a core business.
Toshiba has also requested that Kioxia, the memory chip company in which it owns a 40.6 percent share, issue an initial public offering (IPO) as soon as possible. It is also considering a possible sale of its Kioxia holding.
Toshiba stated earlier in the day that it will sell almost all of its 60 percent ownership in its air conditioning operation to Carrier Global Corp (CARR.N), a joint venture partner in the United States, for $870 million.