You know things aren’t going well when divisions of your own company want to break the chains of their association with you. That is essentially what happened when Toshiba Machine “bought” its independence by buying out the shares of its stock held by parent company Toshiba Corp.
A new and strange twist in the saga of the stumbling Toshiba…
We are only now learning about this strange sequence of events that led to Toshiba Machine Co. Ltd. of Japan buying out the shares of its stock held by parent company Toshiba Corp. And, in so doing, Toshiba Machine has become an independent company free of control by Toshiba – and, more importantly, now disassociated with the parent company’s extreme financial problems.
Although this news only came out this week, apparently the transaction took place in early March. Why March? This was probably done in order to ensure the transaction was completed before the end of the company’s fiscal year on March 31st.
Buying Out Their Largest Shareholder – Toshiba
Specifically, Toshiba Machine bought back 18.1% of the total of 20.1% of its stock held by parent company Toshiba Corp. Toshiba Corp. was their largest shareholder making them part of Toshiba Group and therefore controlled by, and answerable to, their troubled parent. But all of that has changed now.
“As a result [of this transaction], they are no longer our top shareholder and we no longer belong to the Toshiba Group,” said Toshiba Machine Chairman and CEO Yukio Iimura during a formal announcement on Wednesday.
Rumors of Parent Company’s Problems Taking It Down
The company felt compelled to make this formal announcement in answer to rumors circulating that Toshiba Machine’s financial soundness was in jeopardy due to the parent company’s well-publicized financial struggles. Toshiba, as we have reported in several posts, has seen a major subsidiary, Westinghouse Electric, declare bankruptcy leading to Toshiba announced a net loss in the billions of dollars.
Toshiba Machine’s separation from Toshiba Corp. has gone smoothly according to the newly independent company’s CEO. The company says there has been “no impact to its operations, customers, shareholders, employees or business partners.” In fact, the company’s stock has remained stable since the emergence of this news, currently priced near its historical high level.
A Very Positive Time
“This is a very exciting, very positive time for us,” said Mr. Iimura. “For more than 79 years, we have developed peerless technical know-how and a culture which values hard work, integrity, quality and customer responsiveness. Buying back our shares provides greater flexibility so we can be even more responsive. We look forward to continuing our growth and industry-leading contributions to the markets we serve in the future.”
Toshiba Machine was a large division of Toshiba. It was established in 1938 as a heavy machine tool manufacturer whose business has evolved into a diverse group of 48 regional companies and offices. Their business scope has increased as well, now offering injection molding machines, machine tools, die-casting machines, extruders, robotics and high-precision machines. Toshiba Machine employs more than 3,300 people globally.
Involved in 1980s Scandal
In the 1980s, Toshiba Machine was the source of a major scandal involving transferring secret technology to the Russians that allowed them to manufacture submarine propulsion systems that were virtually undetectable. The scandal blew up in the United States, leading to the July 1987 spectacle of members of Congress smashing a Toshiba-branded radio with a sledgehammer on Capitol Hill. Congress also considered banning the sales of any Toshiba-branded product in the United States for five years – ultimately settling on a 3-year business ban on the offending division, Toshiba Machine.