Toshiba announces plan to split into 3 firms, shareholder reaction in focus
Japan's Toshiba Corp outlined
plans on Friday to break up into three independent companies by spinning
off two core businesses - its energy and infrastructure business as well as its
device and storage business.
After spinning off the two companies, Toshiba will continue
to own its 40.6% stake in memory chipmaker Kioxia as well as other assets.
The plan--borne of a five-month strategic review undertaken after
a highly damaging corporate governance scandal--is partly aimed at encouraging
activist shareholders to exit, sources with knowledge of the matter have said.
Toshiba said
in its statement on Friday that the plan was aimed at enhancing shareholder
value.
Some Toshiba investors are not convinced that a break-up would
create value, shareholder sources said ahead of a formal announcement of the
plan. "It makes sense to split if the valuation of a highly competitive
business is hindered by other businesses," said Fumio Matsumoto, chief
strategist at Okasan Securities.
"But if there isn't such a business, the break-up just
creates three lacklustre midsize companies." The
once-storied 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 30-plus overseas investors that helped avoid a delisting but
brought in activist shareholders including Elliott Management, Third Point and
Farallon.
Tension between Toshiba management and overseas shareholders has
dominated headlines since then and in June, an explosive
shareholder-commissioned investigation concluded that Toshiba colluded with
Japan's trade ministry to block investors from gaining influence at last year's
shareholders meeting.
Earlier on Friday, Toshiba released a separately commissioned
report that found executives including its former CEO had behaved unethically
but not illegally.
It concluded that Toshiba was overly dependent on the trade
ministry, adding that problems were also caused by its "excessive
cautiousness towards foreign investment funds" and "its lack of
willingness to develop a sound relationship with them."
Shares in Toshiba finished 1% lower after the governance report.
Details of the review were announced after the market close.
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