Toshiba has modified its proposal to split into three entities less than three months after announcing it in the hopes of wooing cautious investors. However, it’s possible that the Japanese industrial powerhouse has missed the point once more.
Toshiba stated on Monday that it would split its devices and storage solutions businesses into two separate entities, while preserving infrastructure services, which was to be split off under the November proposal. It would also return 300 billion yen ($2.6 billion) to investors over the next two years, which is a threefold increase over its previous proposal.
The revised proposal still fails to acknowledge the lost faith in management that senior shareholders have highlighted as one of their main concerns by focusing on bigger rewards to investors without giving a clear road map for longer-term growth.
After a strategy briefing for investors, CEO Satoshi Tsunakawa said at a news conference, “We want to reach an optimal solution that all stakeholders and shareholders can agree on and accept.” He described the adjustment as an “essential step” toward that goal, rather than a mistake.
The rationale for the move is financial. In November, Toshiba estimated that the split would cost around 10 billion yen to implement, but that figure has already grown to many times that amount. According to the firm, the amended plan will cost around 20 billion yen in one-time transaction charges.
Toshiba would also accelerate the sale of non-core assets, which it hopes to raise an extra 210 billion yen from.
Its goal is to reach a final agreement to put its elevator and lighting businesses on the market by the end of this year. The company also announced that it will be selling most of its stake in Toshiba Carrier, its air-conditioning subsidiary.
These funds will be used to fund expansion projects, as well as significantly enhanced shareholder payments. Tsunakawa explained that the higher returns and divestment from noncore industries will be in a different dimension than the previous strategy.