Toshiba now plans to split into two and raises shareholder return targets

Toshiba logos are pictured during Toshiba Corp’s annual general meeting with its shareholders in Tokyo, Japan, June 25, 2021. REUTERS/Kim Kyung-Hoon

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  • Only device-related businesses would be separated under the new plan
  • Shareholder return target tripled to $2.6 billion over two years
  • Elevator and lighting business will be put on sale
  • Toshiba Tec is no longer considered a core business

TOKYO, Feb 7 (Reuters) – Toshiba Corp (6502.T) announced plans to split into two companies instead of three, while unveiling a sharp rise in expected shareholder returns in a bid to appease investors angry.

However, his revised plan is still expected to face numerous pushbacks from overseas hedge funds, many of whom have opposed any form of spin-off and would prefer the scandal-ridden Japanese conglomerate to be private.

As part of the new restructuring, Toshiba will simply divest its device business. Its previous plan called for a split into three parts – a company for devices, one for its energy and infrastructure business and another to house its Kioxia flash memory chip assets.

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Toshiba also aims to boost shareholder returns to 300 billion yen ($2.6 billion) over the next two years, up from an earlier target of 100 billion yen. Shares of the industrial conglomerate closed up 1.6% on the news.

Sources at several shareholders told Reuters they saw the changes as just a way for Toshiba management to circumvent investor opposition. The new plan is expected to seek approval from just over half of shareholders, while the previous plan – which called for the offloading of a much larger proportion of assets – would have required two-thirds approval.

Toshiba argued that the new plan was simpler, would reduce costs and make it easier to pursue alliances with strategic partners.

“We didn’t change the plan to avoid confrontation with shareholders,” CEO Satoshi Tsunakawa said during a briefing on the first of two days of meetings with investors, adding that the plan would be put to a vote at the meeting. of an extraordinary general meeting in March.

Sources at two investors, who declined to be identified, said they believed the conglomerate would still struggle to win activist shareholder support for the revised plan.

Whether or not Toshiba succeeds in gaining sufficient support could depend on the recommendation of influential proxy advisory firms like Institutional Shareholder Services, one of the sources said.

CONTENTIONAL RELATIONSHIP

Toshiba has had a controversial history with its foreign shareholders, who together own almost 30% of the company.

Last year, a shareholder-commissioned investigation revealed that the conglomerate had colluded with Japan’s Ministry of Commerce to prevent foreign investors from gaining influence at its 2020 shareholders’ meeting.

Chief Cabinet Secretary Hirokazu Matsuno said the government would monitor the progress of Toshiba’s plan.

“Toshiba is a company with important technology, including nuclear power and semiconductors related to national security, and it is important that the business is maintained and expanded,” he said during a briefing. Press.

Toshiba aims to complete the spin-off and listing of its device unit by March 2024. The unit competes with much larger rival Infineon Technologies (IFXGn.DE) as well as Mitsubishi Electric Corp in chips for power management that effectively control the power supply of cars, electronic appliances and industrial equipment.

The company is expected to post net revenue of 860 billion yen ($7.5 billion) and operating profit of 55 billion yen in the year ending March.

Toshiba also said on Monday it would put its elevator and lighting businesses up for sale and added that it was no longer considering Toshiba Tec Corp (6588.T), which makes point-of-sale systems and copiers, as a main activity.

Earlier today, Toshiba said it would sell nearly all of its 60% stake in its air conditioning unit to its US joint venture partner Carrier Global Corp (CARR.N) for $870 million.

Toshiba continues to explore the possibility of a sale of its 40.6% stake in Kioxia and has asked Kioxia to proceed with an IPO as soon as possible.

($1 = 115.2800 yen)

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Reporting by Makiko Yamazaki; Additional reporting by Satoshi Sugiyama and David Dolan; Editing by Edwina Gibbs

Our standards: The Thomson Reuters Trust Principles.

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