Makiko Yamazaki

TOKYO, Reuters – Japanese industrial conglomerate Toshiba Corp (OTC) Corp will outline its plans for Friday’s dissolution into three publicly traded companies. These listed companies will concentrate on hardware, memory chips and infrastructure. Sources familiar with the matter stated that this plan was outlined by sources.

According to them, the strategy was born from a review of strategic planning that took place after an extremely damaging corporate governance scandal. The goal is to increase shareholder value as well as encourage active shareholders out.

The review calls for its nuclear power and infrastructure-related divisions to be housed under one company while its power chips and hard disk drive divisions would form the backbone of another, said the sources who were not authorised to speak to media and declined to be identified.

Toshiba’s 40% stake in Kioxia, an unlisted memory-chipmaker Kioxia will now be held by the third firm.

Toshiba indicated this week that the possibility of a three way split is being considered. Toshiba declined to comment immediately on Friday, ahead of an announcement that would include the second quarter earnings, the corporate governance report’s conclusions and the strategic review.

Some Toshiba investors don’t believe a dissolution would add value to their investments, according to shareholder sources. They declined anonymity before the formal announcement.

Fumio Mumoto, Okasan Securities chief strategist said that splitting is a good idea if valuations of highly competitive businesses are being affected by the presence of other businesses.

But if such a company is not in existence, then the dissolution creates only three mid-sized companies that aren’t as good.

Since 2015’s accounting scandal, the once-respected conglomerate of 146 years has been in constant crisis. It secured a $5.4 Billion cash injection from 30+ overseas investors, which helped it avoid delisting and brought in active shareholders such as Elliott Management, Third Point, Farallon, and Farallon.

Tension between Toshiba management and overseas shareholders has dominated headlines since then and in June, an explosive shareholder-commissioned investigation concluded that Toshiba colluded with Japan’s trade ministry to block investors from gaining influence at last year’s shareholders meeting.

Toshiba, which is now recovering from the COVID-19 pandemic slump, expects to post an operating profit of 37.7 trillion yen in the July-September quarter. This figure represents an increase of 15.8 billion from last year, according to Refinitiv’s average estimate of six analysts.