Toshiba set to announce split into 3 firms, shareholder reaction in focus

Toshiba set to announce split into 3 firms, shareholder reaction in focus

Japanese industrial conglomerate Corp is set to outline plans on Friday to break up into three listed that will focus on infrastructure, devices and memory chips, sources with knowledge of the matter said.

The plan – borne of a strategic review undertaken after a highly damaging corporate governance scandal – is aimed at improving shareholder value and encouraging activist shareholders to exit, they said.

The review calls for its nuclear power and infrastructure-related divisions to be housed under one company while its power chips and hard disk drive divisions would form the backbone of another, said the sources who were not authorised to speak to media and declined to be identified.

The third company will own Toshiba’s 40.6% stake in unlisted memory chipmaker Kioxia.

said this week that a three-way split was one option under consideration. It declined further immediate comment on Friday ahead of a series of announcements that will encompass the strategic review, second-quarter earnings and the conclusions of a corporate governance report.

Some investors are not convinced that a break-up would create value, shareholder sources said, declining to be identified ahead of a formal announcement of the plan.”It makes sense to split if the valuation of a highly competitive business is hindered by other businesses,” said Fumio Matsumoto, chief strategist at Okasan Securities.

“But if there isn’t such a business, the break-up just creates three lacklustre midsize ” The once-storied 146-year old conglomerate has lurched from crisis to crisis since an accounting scandal in 2015. Two years later, it secured a $5.4 billion cash injection from 30-plus overseas investors that helped avoid a delisting but brought in activist shareholders including Elliott Management, Third Point and Farallon.

Tension between Toshiba management and overseas shareholders has dominated headlines since then and in June, an explosive shareholder-commissioned investigation concluded that Toshiba colluded with Japan’s trade ministry to block investors from gaining influence at last year’s shareholders meeting.

Recovering from a slump caused by the COVID-19 pandemic, Toshiba is expected to report an operating profit of 37.7 billion yen for the July-September quarter, up from 15.8 billion yen a year earlier, according to an average of six analysts estimates compiled by Refinitiv.

(Reporting by Makiko Yamazaki; Editing by Edwina Gibbs)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Source link