Toshiba Corp. said Friday it will split into three firms in a major overhaul of the embattled Japanese conglomerate facing intense pressure from foreign activist shareholders.
In a new medium-term business strategy, Toshiba said the three units will respectively focus on infrastructure, devices and semiconductor memory technology.
The envisaged split-up of the behemoth, with a history spanning over a century, would streamline business operations and appease shareholders disgruntled by lackluster efforts to boost growth and corporate value.
Toshiba has a variety of businesses, from nuclear power and elevators to hard disk drives and semiconductors. In fiscal 2020 ending in March, it had over ¥3 trillion ($26 billion) in sales.
Keeping diverse businesses under one company has benefits, but financial markets tend to value the conglomerate at less than the sum of its combined businesses.
Foreign shareholders hold the bulk of Toshiba, seen as a company critical to national security. Activist shareholders gained influence after investing in Toshiba, which floundered following the 2017 bankruptcy of its U.S. nuclear plant subsidiary Westinghouse Electric Co.
The release of the new medium-term business strategy follows a whirlwind of events that have tarnished the image of Toshiba, already damaged by an accounting scandal in 2015.
In June, an independent investigation panel found that Toshiba executives had colluded with the Ministry of Economy, Trade and Industry to prevent foreign activist shareholders from influencing the board by sending in directors, a revelation that forced its board chairman and another director to be voted out in a general shareholders’ meeting.
CEO Satoshi Tsunakawa defended Toshiba’s relationship with the government due to the nature of its businesses linked to national security and social infrastructure. But he acknowledged that Toshiba went “too far.”
In a report released Friday, Toshiba’s governance panel looking into the case separately from the earlier probe said executive officers, including former CEO Nobuaki Kurumatani, had violated corporate ethics expected by financial markets, but they did not break the law.
The panel, consisting of lawyers, acknowledged that Toshiba executives had expected the powerful ministry would make an administrative move from the viewpoint of economic security, with “active involvement” by Kurumatani. But the ministry’s approach to foreign activist shareholders was not illegal, it said.
The problem resulted from Toshiba’s corporate culture that is “overly dependent” on the industry ministry and “excessive cautiousness” about foreign investment funds.
Kurumatani abruptly resigned in April amid internal friction within its management over a buyout proposal by British private equity firm CVC Capital Partners.
Kurumatani was head of CVC’s Japanese unit before joining Toshiba, raising speculation that he was seeking to turn Toshiba into a private company and protect it and him from mounting pressure from foreign activist shareholders.
Toshiba has undergone sweeping restructuring in recent years, shifting its business focus from consumer electronics, which earned its status as a household name, to infrastructure and renewable energy.
Toshiba has already sold its TV business to China’s Hisense Group and its white goods segment to China’s Midea Group Co. The PC unit, known for the Dynabook laptop, was sold to Sharp Corp. under Taiwan’s Hon Hai Precision Industry Co.
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