Toshiba Now Plans To Split Into 2 Companies, Not Three

Japanese conglomerate Toshiba Corp. said it now plans to separate itself into two standalone companies, instead of three.

The company, which in November last year had announced its plan to separate itself into three companies, now said the fastest, most effective and efficient way for sustainable profitable growth and compelling benefits would be to separate into two standalone companies and to divest certain non-core assets.

Towards this, the company has also entered into an agreement to sell its joint venture stake in Toshiba Carrier Corp. to the Carrier Group for around 100 billion yen. Divestiture plans for Toshiba Elevator and Building Systems Corp. and Toshiba Lighting & Technology Corp. are also ongoing.

Toshiba has designated Toshiba Tec Corp. as a non-core business. The company will work with Toshiba Tec in the short-term to facilitate its own mid- to long-term business plan.

The company projects 300 billion yen of shareholder returns over the next 2 years. Under its reorganization plan, the company had said that any capital in excess of the appropriate level of capital would be used to give back to shareholders, including share repurchases in FY2022 and FY2023.

Between the two new companies Toshiba/ Infrastructure Service Co. and Device Co., the latter will be spun off tax-free from Toshiba and its company stock will be distributed to shareholders at the time of the spin-off record date. Device Co.’s official name will be announced upon completion of the spin-off.

The reorganization remains on track to be completed in the second half of fiscal year 2023.

Toshiba/ Infrastructure Service comprises Toshiba’s Energy Systems & Solutions, Infrastructure Systems & Solutions, Digital Solutions and Battery businesses. This will also include Toshiba’s ownership stake in Kioxia Holdings Corp.

Toshiba/ Infrastructure Service Co. is expected to have net sales of 1.52 trillion yen in fiscal 2021 and is projected to grow at a compound annual growth rate or CAGR of 5.3 percent, reaching 1.87 trillion yen by fiscal 2025. It also expects to improve operating income margins to 6.4 percent from 3.6 percent over the same period.

Device Co. consists of Toshiba’s Electronic Devices & Storage Solutions business. Its products will include power semiconductors, optical semiconductors, analog integrated circuits, high-capacity hard disk drives for data centers and semiconductor manufacturing equipment.

Device Co. is expected to have 860 billion yen in fiscal 2021 net sales. It is projected to grow, excluding the memory resale portion, at a CAGR of 4.1 percent, reaching 1.01 trillion yen by fiscal 2025. It expects operating income margins to improve to 7.9 percent by FY2025 from 6.4 percent in FY2021.

Toshiba will host its IR Day on February 7 and 8 for a review and explanation of the business strategies for Toshiba/ Infrastructure Services Co. and Device Co.

In Japan, Toshiba shares were trading at 4,800 yen, up 1.63 percent.

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