Toshiba intends to split into two companies
Toshiba intends to split – 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 the power chip section, will be split off under the new structure. It had previously planned to divide into three companies: one for energy and infrastructure, another for devices, and yet another for flash memory chips.
In addition, the industrial company now expects to boost shareholder returns to 300 billion yen ($2.6 billion) over the next two years, up from a previous target of 100 billion yen.
It also aims to sell its elevator and lighting businesses, and Toshiba Tec Corp, which develops point-of-sale systems and copiers, will no longer be considered a core company. Toshiba has also requested that Kioxia, the semiconductor company in which it owns a 40.6 percent share, issue an initial public offering as soon as feasible. It is also considering a possible sale of its Kioxia holding.
Toshiba intends to split
Although some investors believe the new plan is meant to allow Toshiba to avoid a shareholder vote that would have required two-thirds support, the two-way split would save expenses compared to a three-way split.
On Friday, a top-15 shareholder official, who did not want to be identified, told Reuters that management had revised the strategy to “fit themselves.” Under recent rules aimed to speed up the break-up of firms, the two-way split would just require board consent.
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.
Foreign funds own over 30% of Toshiba, and many of them appear to be opposed to the split. The corporation may have been forced to abandon its proposal if the two-thirds requirement had been met.
It previously stated that it will sell almost all of its 60 percent ownership in its air conditioning unit to Carrier Global Corp, a US joint venture partner, for $870 million.
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