Toshiba plans to split into three after wave of scandals

Monday, 15 November 2021 00:13 - - {{hitsCtrl.values.hits}}

TOKYO (Reuters): Toshiba Corp. outlined plans on Friday to split into three companies in an attempt to appease activist shareholders calling for a radical overhaul of the Japanese conglomerate after years of scandals.

A rare move in a country dominated by conglomerates, Toshiba's breakup comes the same week US industrial powerhouse General Electric called time on its sprawling empire and Johnson & Johnson announced it was splitting up, too.

Founded in 1875, Toshiba plans to house its energy and infrastructure divisions in one company while its hard disk drives and power semiconductor businesses will form the backbone of another. A third will manage Toshiba's stake in flash-memory chip company Kioxia Holdings and other assets.

The plan, borne of a five-month strategic review undertaken after a highly damaging corporate governance scandal, is partly designed to encourage activist shareholders to sell their stakes, sources with knowledge of the matter have said.

A breakup, however, runs counter to calls by activist investors for Toshiba to be taken private and some major shareholders said the plan may struggle to get through an extraordinary general meeting due to be held by March.

The overhaul was announced after markets in Japan had closed but the company's Frankfurt-listed shares fell 4% at the open on Friday highlighting investor disappointment. The shares later recovered slightly in very low volume.

The 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 more than 30 overseas investors that helped avoid a delisting but brought in activist shareholders including Elliott Management, Third Point and Farallon.