Japan’s Toshiba on Monday announced plans to split into two companies, revising a controversial proposal to divide into three following a tumultuous period for the storied industrial conglomerate.
The group said it plans to spin off its device segment, including its semiconductor business, in a bid to speed up decision-making and boost stock performance.
Shareholders, who have clashed with management on the best way forward for the troubled company, must still approve the proposal in a vote expected in March. The original spin-off plan faced stiff opposition from some key investors.
The firm also said it will unload its stake in air-conditioning business Toshiba Carrier and seek to sell its elevator and lighting units.
“We believe a spin-off is optimal,” president and CEO Satoshi Tsunakawa told investors, promising it would “enable more agile and flexible operations.”
He said the sprawling business “struggled with the conglomerate discount and slowness in decision-making” in the past, and streamlining operations would allow investors to choose the portion of the business that interested them.
Toshiba initially unveiled a plan to split into three last November, in what analysts called a test case for other Japanese giants.
But it said Monday that “since this is the first large-scale spin-off transaction in Japan… it turned out there were obstacles which were not initially expected”.Among those were higher-than-expected costs, and an extensive process to list the two new entities.
A two-way split instead “can significantly reduce separation costs, secure financial soundness for each company, and significantly reduce spin-off uncertainty”, the company said.
The spin-off is expected to cost 20 billion yen ($173 million) over two years, with running costs also increasing by 13 billion yen a year.But Tsunakawa said that would be offset by plans to reduce operating costs by 30 billion yen annually.