Following a turbulent decade for the famous industrial company, Toshiba revealed plans to split into two businesses on Monday, revising plans to break into three.
The company announced plans to split off its device sector, which includes the semiconductor industry, in order to improve decision-making and stock performance.
Shareholders must still support the proposal in a vote due in March, despite their disagreements with management on the best way ahead for the struggling company.
Toshiba announced last year that it will split into three entities, a move that analysts dubbed a “test case” for other Japanese conglomerates.
“Because this is Japan’s first large-scale spin-off transaction… there were impediments that were not initially envisaged,” Toshiba said on Monday, referring to the November proposal.
It has since been determined that a two-way split “may significantly cut separation expenses, secure financial soundness for each firm, and reduce spin-off uncertainty.”
Toshiba plans to finalize the separation in the second half of the fiscal year 2022-23.
Other multinational conglomerates, such as General Electric and Johnson & Johnson, have revealed intentions to split into multiple entities in recent months, a decision analyst believe was imposed on them in large part by financial markets.
When stock prices are high, such as during the Covid-19 market rise last year, spinoffs can help huge firms produce additional value.
Toshiba’s current plans bring an end to years of instability for the company, which was founded in 1875 and was long seen as a symbol of Japan’s sophisticated technological and economic prowess.
Following a succession of scandals and losses, shareholders decided to remove the board’s chairman last year, in a rare victory for activist investors in corporate Japan.
On Monday, Toshiba also announced intentions to sell Toshiba Carrier, its air-conditioning unit, to Carrier Corporation of the United States in a deal worth an estimated 100 billion yen ($867 million).
When the deal is completed later this year, the conglomerate will own only 5% of the air-conditioning company’s shares, down from 60% now.
Toshiba said in a statement that it anticipated the transaction would allow Toshiba Carrier to “realize its full growth potential” as global cooling system demand develops.
Toshiba is reportedly considering selling Toshiba Elevator and Building Systems Corp, as well as Toshiba Lighting & Technology, according to Nikkei Asia.
