Toshiba’s New Breakup Plan Faces Lower Shareholder Hurdle

Toshiba Chief Executive

Satoshi Tsunakawa

said at an online meeting with investors that the company could theoretically carry out the spinoff with only the board’s approval under a government program that seeks to ease spinoffs and strengthen industrial competitiveness, but he said Toshiba would seek support from its shareholders.

The initial plan for the three-way split would have required the approval of two-thirds of shareholders because of a need to secure funding.

“We reached this decision to ensure the split goes ahead,” Mr. Tsunakawa said. He said costs would be lower under the new plan and it would be easier to ensure strong corporate governance at each company.

In November, Toshiba had said it planned to split into three units, one focusing on infrastructure, a second on electronic devices and a third to manage the company’s stake in flash-memory company Kioxia Holdings Corp. and other assets.

Ahead of Monday’s announcement, some shareholders called for stronger measures to lift the value of the long-struggling technology conglomerate. Objecting shareholders have also said they want to make it easier to block any plan they find inadequate.

Two of Toshiba’s biggest shareholders, Farallon Capital Management LLC and Singapore-based 3D Investment Partners Pte., said in January Toshiba should seek the approval of two-thirds of its shareholders, rather than a simple majority, to go ahead with any separation plan.

Representatives of the two shareholders didn’t immediately respond to requests for comment and it wasn’t known if they joined the online meeting.

The company plans to hold a special shareholders’ meeting by the end of March to gather opinions and hold a final vote in 2023. The company hasn’t made a decision about the threshold needed for shareholder approval of the new plan, Mr. Tsunakawa said.

Mr. Tsunakawa said Monday’s decision wasn’t aimed at avoiding pressure from shareholders, but some analysts disagreed.

“It looks like the company is trying to buy time,” said Yoshiharu Izumi, an analyst at SBI Securities. Activist investors may unload their stakes in Toshiba if the company can sell shares in Kioxia and return the proceeds to shareholders soon, he said.

Earlier Monday, Toshiba said it would sell a 55% stake in an air-conditioner joint venture to its partner,

Carrier Global Corp.

, for about $868 million. The company also said it planned to sell its elevator and lighting businesses.

Toshiba shares rose after the announcement and closed 1.6% higher in Tokyo trading. The company also said it would triple shareholder returns to 300 billion yen, or about $2.6 billion, over the next two years.

Toshiba has gone through repeated upheavals since an accounting scandal emerged in 2015, and foreign shareholders now hold big stakes.

Tensions between the company and shareholders grew after a report released in June 2021 found evidence of broad collaboration between the company and government officials to stifle foreign shareholders’ voices ahead of an annual shareholder meeting in July 2020. One executive wrote an email saying that the group’s way of dealing with those shareholders was to “beat them up,” according to the report.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com