Toshiba is considering a plan to split into three separate companies, as Japan’s most famous conglomerate seeks to rebuild its market value and address the demands of activist shareholders.
The proposal is just one of several under discussion by Toshiba, which was forced by investors this year to establish a committee to overhaul the group’s strategy after a shareholder revolt.
Under the proposal, the conglomerate would be divided into a devices company, an infrastructure group and a business focused on semiconductors and memory chips, according to two people with knowledge of the plan. The businesses, according to one version of the plan, would eventually be listed, with Toshiba’s existing investors receiving stock in each.
It remains unclear whether all Toshiba’s sprawling businesses would fit within the three new companies or whether some would be sold off to private equity groups. Another crucial element is who will have control over the businesses that include sensitive technologies that would attract scrutiny from the Japanese government.
Toshiba’s involvement in several highly sensitive areas of national security, including nuclear power and defence contracting, has added a layer of complexity to any restructuring of the group, which has been beset by crises since 2015.
“It depends on details of the plan whether it will be viable. The key question is whether the businesses can continue to grow even after they are split up,” said one government official.
Toshiba confirmed late on Monday that splitting the group into three was an option on the table after the plan was first reported by the Nikkei newspaper. However, people close to the company have cautioned that the committee may present several proposals when it announces the result of its strategic review on Friday.
Such a split would be unprecedented for a Japanese conglomerate, but would echo the step DowDuPont took following the 2017 merger of Dow Chemical and DuPont. The US chemicals group broke up into three separate companies in response to shareholder concerns about the size and lack of focus of the combined entity.
Toshiba continues to face pressure from its largest shareholders, some of whom argue that Toshiba’s best option is to invite buyout offers from private equity firms that could delist the company and address its restructuring beyond the glare of the public market.
This year, Toshiba’s former chief executive said that the company was considering a $20bn buyout proposal from the UK-based private equity firm CVC. The proposal was preliminary, but triggered a boardroom coup that ousted the chief executive and has led to a situation where some of Toshiba’s largest shareholders have said they will oppose any strategic option that does not allow for the possibility of a buyout.
Toshiba’s troubled relationship with its shareholders dates from 2017, when a financial crisis pushed the company into an emergency fundraising that brought a large number of foreign and activist funds on to the shareholder register. Though many members of that register have since changed, Toshiba’s management continues to face a level of scrutiny and pressure that is rare elsewhere in corporate Japan.
The debate over Toshiba’s future has come to a head as some funds fear Japan may be becoming more hostile towards foreign investors. Under Fumio Kishida, the new prime minister, Japan has established its first minister charged directly with overseeing economic security.