Japanese Toshiba to Split into Three Business Divisions... First Among Japanese Companies

Semiconductors, Infrastructure, and Devices
Currently Proceeding with the Goal of Spinning Off and Listing in 2 Years

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Japanese company Toshiba is reportedly considering splitting into three companies by infrastructure, devices, and semiconductor memory business divisions and listing them separately. This would be the first case among Japanese companies to split and list a large corporation, aiming to increase the market value of the businesses and respond to activist shareholders' demands. It is expected to be a historic turning point for the Japanese industrial sector.

According to the Nihon Keizai Shimbun on the 9th, Toshiba is discussing realizing the split and listing with a target of two years from now. Toshiba is reportedly in final coordination to include this plan in the medium-term management plan to be announced at the board meeting on the 12th.

Toshiba operates 296 subsidiaries across six fields including power generation facilities such as nuclear and thermal power, transportation systems such as roads and railways, elevators and air conditioners, point of sale (POS) systems, hard disk drives (HDD), and semiconductors. For the fiscal year ending March 2021 (April 2020 to March 2021), sales amounted to 3.0543 trillion yen (approximately 31.8215 trillion KRW). The plan is to consolidate all businesses except semiconductor memory into infrastructure and devices. The semiconductor memory division is expected to become a stockholding company of Kioxia. Ultimately, there is also a possibility of splitting into two companies by including semiconductors in devices, resulting in device and infrastructure companies.

Toshiba’s consideration of splitting and listing is an unusual move for a Japanese company aimed at increasing corporate value. Although each business division is highly valued in the market, when combined as a conglomerate, a discount occurs where the total value is assessed lower than the sum of each division’s value. Additionally, the spin-off is expected to accelerate management decisions. When businesses with different characteristics are grouped under one company, decisions regarding financing or mergers and acquisitions (M&A) strategies can be made more efficiently.

Toshiba has been undergoing reconstruction after several crises including an accounting scandal six years ago and huge losses in the nuclear business. Amid growing conflicts with shareholders over corporate management, Toshiba established a strategy committee composed of five outside directors after the shareholders’ meeting in June. This committee has been working on distinguishing core and non-core businesses as a business plan that prioritizes shareholder interests. However, as of the end of March, Toshiba’s consolidated subsidiaries number 296, and it is observed that dividing them into three categories will require a considerably complex task.

This content was produced with the assistance of AI translation services.