Toshiba Corporation has announced that it is splitting up into three standalone companies, namely Infrastructure Service Co, Device Co, and Toshiba. It hopes to deliver sustainable profit growth as well as boost-up shareholder value and trust.
According to the company’s outline, Infrastructure Service Co will comprise Toshiba’s energy systems, building solutions, infrastructure systems, and digital solutions businesses.
Its products and services will consist of IT solutions for government agencies and private companies, power generation, transmission and distribution, renewable energy, energy management, systems solutions for public infrastructure, railways and industry, and building energy-saving solutions.
Meanwhile, Device Co. will include Toshiba’s electronic devices and storage solutions business where its products will comprise optical semiconductors, power semiconductors, semiconductor manufacturing equipment, analog integrated circuits, and high-capacity hard disk drives for data centers.
Toshiba will hold shares in Kioxia Holdings Corporation (KHC) and Toshiba Tec Corporation. Due to the separation, Toshiba will liquidate the shares of KHC into cash.
For FY21, Toshiba expects Infrastructure Service Co to deliver net sales of ¥2 trillion, and its growth projection is expected at a 3.3% compound annual growth rate (CAGR). Device Co will post ¥870 billion in net sales and is projected, when excluding the memory resale portion, to grow at a CAGR of 3.3%, achieving ¥880 billion by FY23.
Toshiba’s board had unanimously approved the split and it is a part of the plan that was devised from a suggestion made by the board’s strategic review committee. In a letter to the shareholders, the committee outlined that the separation plan is just the beginning of a process contemplating a significant transformation of each independent company, positioning them better for sustained profitable growth while securing near-term returns for shareholders.
According to the official statement of Toshiba interim chair, president, and CEO Satoshi Tsunakawa, “In order to enhance our competitive positioning, each business now needs greater flexibility to address its own market opportunities and challenges.”
He added that “We are convinced that the business separation is attractive and compelling: it will unlock immense value by removing complexity, it enables the businesses to have much more focused management, facilitating agile decision making, and the separation naturally enhances choices for shareholders.
Our board and management team firmly believe that this strategic reorganization is the right step for sustainable profitable growth of each business and the best path to create additional value for our stakeholders.”
The separation is expected to be finalized by the second half of FY23, subject to mandatory procedures, including shareholder approval.