Toshiba told shareholders on Monday it now intends to separate the company into two standalone companies, instead of three, as it had previously announced.
Under the revised plans, Toshiba and Infrastructure Service Co will remain as one entity, while Device Co will be spun out, as initially planned.
In this latest restructure, Toshiba and Infrastructure Co will consist of Toshiba’s energy systems, infrastructure systems, building solutions, and digital solutions businesses, in addition to Toshiba’s ownership stake in Kioxia Holdings Corporation (KHC).
This will leave Device Co with Toshiba’s electronic devices and storage solutions business.
The company said the decision to separate into two independent businesses follows the board’s “thorough review” of its reorganisation plan and processes.
“After further engaging with key stakeholders and completing the additional analysis, we determined that separating Toshiba into two standalone companies and divesting certain non-core assets is in the best long-term interests of our company and its shareholders, customers, business partners and employees,” Toshiba interim chair, president and CEO Satoshi Tsunakawa said.
“The refined strategic reorganisation plan creates two distinctive companies that are well-positioned to take advantage of their unique strengths and business cycles.
“We will be able to deliver these benefits while providing a clearer path to completion, reducing the associated costs, maintaining tax-free status and keeping to our stated timeframe of completing the spin-off in the second half of FY2023.”
The Japanese company added it expects Toshiba and Infrastructure Services Co will achieve net sales of ¥1.52 trillion in FY21 and is projected to grow at a compound annual growth rate (CAGR) of 5.3%, reaching ¥1.87 trillion by FY25. It also expects to improve operating income margins from 3.6% to 6.4% over the same period.
“Device Co is expected to have ¥860 billion in net sales in FY2021 and is projected – when excluding the memory resale portion – to grow at a CAGR of 4.1%, reaching ¥1.01 trillion by FY2025. It expects operating income margins to improve from 6.4% in FY2021 to 7.9% by FY2025,” the company said.
The restructuring plans are touted to help deliver sustainable profit growth as well as enhance shareholder value and trust, after several months of turmoil within the company, including the ousting of the company’s chairman Osamu Nagayama by shareholders in June.
Another director that was part of Toshiba’s audit committee, Nobuyuki Kobayashi, was also ousted during the vote by shareholders during the company’s annual general meeting (AGM) last year.
It was the first AGM since an independent investigation [PDF], passed by shareholders, revealed the company colluded with Japanese officials to prevent certain shareholders from exercising their voting rights at last year’s annual general meeting.
Nagayama previously penned an open letter stating his “deep regret” about Toshiba’s conduct and pledged to be an agent of positive change.
The investigation, conducted by three lawyers, found Toshiba “devised a plan” with Ministry of Economy, Trade and Industry officials to prevent Effissimo Capital Management, which holds 9.9% of Toshiba shares, from exercising certain shareholder proposals at Toshiba’s annual general meetings.
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