Toshiba plans spin-offs to speed reconstruction process

Toshiba, which is undergoing business reconstruction, intends to spin off its main businesses, such as social infrastructure and energy, it was learned Tuesday.

Toshiba aims to speed up the decision-making process in each of its business areas so that reconstruction of its management can proceed more quickly.

Under the current plan, four businesses will be spun off: social infrastructure; energy such as thermal power plants; electronic devices other than memory chips; and ICT solutions, which mainly handle internet of things (IoT) products.

Toshiba’s memory chips business was already spun off on April 1.

The separation of the four business areas may result in the transfer of about 20,000 employees to new companies, or about 80 percent of Toshiba’s current staff.

Toshiba will soon make the decision at a meeting of its board of directors. After obtaining approval at a regular shareholders meeting to be held in June, the spin-off plan will be implemented.

Westinghouse Electric, Toshiba’s U.S. subsidiary in the nuclear energy business, applied for Chapter 11 of the U.S. Bankruptcy Code – equivalent to Japan’s Civil Rehabilitation Law.

As a result, Toshiba’s surplus of debts against its assets may have amounted to about %620 billion as of the end of March.

The spun-off semiconductor memory chips subsidiary, which had been Toshiba’s major earner, is scheduled to be sold through tenders by the end of this fiscal year.

Toshiba will likely continue to hold shares in the four spun-off companies.

Toshiba expects its social infrastructure business, such as elevators and air-conditioners, and energy business, such as thermal power plants, to be its main bread earners in the future.

At a press conference March 14, Toshiba President Satoshi Tsunakawa expressed his intention to consider organizational restructuring, including spinning off businesses into subsidiaries.

Another reason for the spin-offs is the possibility that Toshiba will be unable to obtain a license as a special construction business due to the deterioration of its financial condition.

The license is given by the Land, Infrastructure, Transport and Tourism Ministry, and is necessary for winning orders for large-scale construction works.

To obtain the license, companies must fulfill such conditions as holding a certain degree of capital.

If Toshiba can not obtain the license, it may adversely affect work to decommission reactors of Tokyo Electric Power Company Holding Inc.’s Fukushima No. 1 nuclear power plant.

But if the business that receives orders for the work is spun off, it can avoid being negatively affected by the worsening business performance of Toshiba’s main operations.