Troubled Toshiba to split into two companies instead of three

Splitting into two companies would be cheaper and smoother than the original plan, Toshiba said. PHOTO: REUTERS

TOKYO (BLOOMBERG) - Toshiba said it would divide into two companies and sell non-core assets, scrapping an initial three-way split that faced fierce criticism from activist shareholders.

The Japanese tech giant plans to spin off the devices business, which includes semiconductors, and list it, it said in a statement on Monday (Feb 7). Splitting into two companies would be cheaper and smoother than the original plan, it said.

The company will use 300 billion yen (S$3.5 billion) of excess capital for shareholder returns over two years, it said.

Toshiba will continue to own shares of memory-chip business Kioxia Holdings, it said, and will seek to monetise the shares "immediately" and return proceeds to shareholders. The company has also designated Toshiba Tec, its listed electronic equipment business, as a non-core business, it said.

Toshiba, once among Japan's most revered companies, has been in crisis mode for years due to repeated scandals and management missteps. It invented flash memory for computing, but had to sell control of its crown jewel semiconductor business to pay for a disastrous expansion in nuclear power.

That deal opened the door to activist investors who have pushed for change. They include Effissimo Capital Management and 3D Investment Partners, which are the two largest shareholders with 10 per cent and 7.6 per cent stakes respectively, according to data compiled by Bloomberg.

Chief executive Satoshi Tsunakawa said last year he believed the three-way split, into infrastructure, memory chips and devices entities, was best for the company and stock holders.

But some of Toshiba's largest shareholders pushed back strongly against the plan, with 3D Investment opposing it and requesting that an upcoming vote on it would require a two-thirds majority. Farallon Capital Management, another large shareholder, backed 3D's calls.

Toshiba will also sell a 55 per cent stake in air-conditioning business Toshiba Carrier to its US joint venture partner Carrier Global Corp for about 100 billion yen, it said earlier on Monday.

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