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Toshiba decides Twoshiba's the best strategy, cans plan to create Threeshiba crowd

Strategy to make printer co. its flagbearer dropped, hands that job to infrastructure mega corp

Japanese tech giant Toshiba has abandoned its plan to break the company into three parts, opting for a strategy to split into two parts.

Toshiba's had a torrid few years as an accounting scandal, a governance scandal saw senior executives depart and private equiteers take a crack at poaching the company while it was wounded.

The company’s response was a plan, announced in November 2021, to split itself into three entities. Under than plan, Toshiba would persist as the operator of Toshiba Tec Corporation – a business focused on printers, barcode kit, and point of sale tech. The new Toshiba would inherit the 40 per cent stake Toshiba holds in memory-maker Kioxia (which was spun out in 2019), sell it, then return the proceeds to investors.

The plan also called for the spinout of an entity dubbed "Device Co." to take over Toshiba's semiconductor business. The third business, provisionally named "Infrastructure Service Co.", would get big gigs like power generation and transmission.

Investors did not like the plan, and objected on grounds it was not in their best interests. Opposition to the plan was vigorous and sustained, with some critics suggesting the breakup plan was yet another example of Toshiba management getting it wrong.

Management listened and yesterday proposed a new plan. Toshiba Tec has been deemed non-core but will be retained for as long as is required to develop a new business plan, Device Co. will proceed as planned, and the Infrastructure Services entity will inherit the Toshiba legacy to emerge as "Toshiba/Infrastructure Service. Co." The Kioxia stake will still be sold.

Execs said this structure is expected to deliver better returns for shareholders, and was necessary not only because investors objected to the previous plan but also because a breakup of this sort had never been attempted before in Japan and unforeseen obstacles made it impossible.

Among those complications was the complexity of taking a single listed entity and splitting it three ways. Execs said they feel confident it will be easier to split into two, cost less to do so and create more value and greater savings.

The proposed strategy will not, however, see a complete split. Device Co. will enter into service agreements with the infrastructure organisation for shared basic services and some R&D.

A timeline for the re-org calls for its completion in 2023. Key milestones include an extraordinary general meeting in March 2022, regulatory approval later in the same year, and a shareholder vote in June 2023.

It remains to be seen if the plan will satisfy investors, some of whom are known to believe that Toshiba is ripe for the ruthless style of decision-making often employed by private equity. Toshiba's board does not share that opinion and, given the company's recent tumultuous history, it would be no surprise if this latest plan leads to further conflict. ®

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