Toshiba Corp. said Friday it will split into three listed firms by the end of fiscal 2023, in a major overhaul of the embattled Japanese conglomerate facing intense pressure from foreign activist shareholders.

The rare reorganization of the behemoth, with a history spanning over a century, would result in two spinoff firms focusing on infrastructure and devices, and the remaining company holding stakes in chipmaker Kioxia Holdings Corp. and Toshiba Tec Corp.

The split-up marks the end of a chapter for household name Toshiba, once known for its consumer electronics. It is seen as an attempt to appease shareholders disgruntled by lackluster efforts to boost growth and corporate value.

"It's an extremely big change for us," Toshiba CEO Satoshi Tsunakawa said at a press briefing. "We seriously examined all possible options to maximize our shareholder value."

The names of the new companies will be announced later and Toshiba, listed on the First Section of the Tokyo Stock Exchange, plans to hold an extraordinary shareholders' meeting in the January to March period to explain the decision.

Existing Toshiba shareholders will be allocated shares in the three entities.


Related coverage:

Toshiba mulls splitting into 3 listed firms amid overhaul

Toshiba CEO wants new board chair approved by year-end after ouster

FOCUS: Toshiba management woes seen deepening after strong shareholder rebuke


Toshiba has a variety of businesses, from nuclear power and elevators to hard disk drives and semiconductors. In fiscal 2020 ended in March, it had over 3 trillion yen ($26 billion) in sales.

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.

While keeping diverse businesses under a company has benefits, financial markets tend to value a conglomerate at less than the sum of its combined businesses, markets analysts said. Earlier this week, U.S. industrial conglomerate General Electric Co. said it would split into three public companies focusing on aviation, health care and energy.

Supplied photo shows Toshiba CEO Satoshi Tsunakawa speaking at an online press conference on Nov. 12, 2021. (Kyodo)

The rationale behind what Tsunakawa described as "not a breakup but an evolution," is that each company with specialty areas can make decisions and operate with agility.

Under its medium-term business strategy, released Friday, Toshiba's nuclear power, thermal power and renewable energy will go into the infrastructure unit with projected sales of over 2 trillion yen in fiscal 2023.

The device unit will deal with hard disk drives, semiconductors for power devices among other products and aim to achieve 880 billion yen in sales.

Toshiba stuck to its plan to sell part of the stake in Kioxia and give the proceeds to its shareholders.

"We have transformed our shape and developed with the changes of the times in our history of over 140 years. The infrastructure and device companies will aim to become leading firms in respective areas through the strategic realignment," Tsunakawa said.

The release of the new 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.

The CEO had 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 the corporate ethics that are expected by financial markets, but they did not break the law.

The panel, consisting of lawyers, acknowledged that Toshiba executives, with the "active involvement" of Kurumatani, had expected the powerful industry ministry to make an administrative move from the viewpoint of economic security. But the ministry's approach to foreign activist shareholders was not illegal, it said.

The problem resulted from Toshiba's corporate culture that was "overly dependent" on the industry ministry and "excessive cautiousness" about foreign investment funds.

During the press conference, Tsunakawa acknowledged the importance of enhancing Toshiba's corporate governance. "The spin-off plan will not be possible without rebuilding the governance structure," he said.

His predecessor Kurumatani abruptly resigned in April amid management friction 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 he was seeking to turn Toshiba into a private company and protect it and him from mounting pressure from foreign activist shareholders.

Prompted by the accounting scandal and financial hardships, Toshiba has undergone sweeping restructuring in recent years. It 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 Dynabook laptops, was sold to Sharp Corp. under Taiwan's Hon Hai Precision Industry Co.