Toshiba Corporation intends to split itself into three standalone companies:
Infrastructure Service Co., consisting of Toshiba’s Energy Systems & Solutions, Infrastructure Systems & Solutions, Building Solutions, Digital Solutions and Battery businesses;
Device Co., comprising Toshiba’s Electronic Devices & Storage Solutions business; and
Toshiba, holding its shares in Kioxia Holdings Corporation (KHC) and Toshiba Tec Corporation. Kioxia is a Japanese multinational computer memory manufacturer spun-off from Toshiba as Toshiba Memory Corporation in June 2018.
Official names for the first two will be announced in due course.
The separation will create two distinctive companies with unique business characteristics leading their respective industries in realizing carbon neutrality and infrastructure resilience (Infrastructure Service Co.), and supporting the evolution of social and IT infrastructure (Device Co.).
The separation allows each business to increase its focus and to facilitate more agile decision-making and leaner cost structures. As such, both companies will be much better positioned to capitalize on their distinct market positions, priorities and growth drivers to deliver sustainable profitable growth and enhanced shareholder value.
At the same time, Toshiba intends to monetize shares in Kioxia while maximizing shareholder value and return the net proceeds in full to shareholders as soon as practible to the extent that doing so does not interfere with the smooth implementation of the intended spin-off.
This separation plan, which has been unanimously approved by Toshiba’s Board, follows a review of a wide range of strategic options by the Board’s Strategic Review Committee (SRC), comprising five Independent Outside Directors. During its review, the SRC sought input from shareholders on the company’s strategic direction and held discussions with a number of potential partners.
Based on the thoroughness of the nearly five months review, Toshiba’s management team and Board of Directors are confident that the intended separation into three standalone companies is the best path to enhance shareholder value.
New structure: overview of three companies
Infrastructure Service Co. will consist of Toshiba’s Energy Systems & Solutions, Infrastructure Systems & Solutions, Building Solutions, Digital Solutions and Battery businesses. Its products and services will include power generation, transmission and distribution, renewable energy, energy management, systems solutions for public infrastructure, railways and industry, building energy-saving solutions, and IT solutions for government agencies and private companies.
Infrastructure Service Co. is expected to have net sales of ¥2.090 trillion (US$20 billion) in FY 2021 and is projected to grow at a 3.3% compound annual growth rate (CAGR), reaching ¥2.230 trillion by FY2023. It also expects to improve operating income margins from 5.1% to 5.2% over the same period.
Device Co. will comprise Toshiba’s Electronic Devices & Storage Solutions business. Its products will include power semiconductors (silicon, compounds), optical semiconductors, analog integrated circuits, high-capacity hard disk drives (HDD) for data centers (nearline HDDs) and semiconductor manufacturing equipment. It will be a leader in supporting the evolution of social and IT infrastructure.
Device Co. is expected to have ¥870 billion ($7.63 billion) in net sales in FY2021 and is projected—when excluding the memory resale portion—to grow at a CAGR of 3.3%, reaching ¥880 billion by FY2023. Power semiconductor net sales are expected to grow at an 13% CAGR, increasing from ¥95 billion in FY2021 to ¥120 billion by FY2023. Nearline HDD net sales are expected to grow at a 18% CAGR, increasing from ¥200 billion in FY2021 to ¥280 billion by FY2023. Device Co. expects operating income margins to change from 7.1% in FY2021 to 6.1% by FY2023.
Toshiba will hold the ownership stake in Kioxia Holdings Corporation (KHC) and Toshiba Tec Corporation. In connection with the separation of the businesses, Toshiba will seek to convert the shares of KHC into cash as soon as practicable while maximizing shareholder value. As part of this process, Toshiba intends to return the net proceeds of Kioxia shares to shareholders in full to the extent that doing so does not interfere with the smooth implementation of the spin-off.