Why Toshiba and Johnson & Johnson are the latest corporate behemoths doing the splits
Three is a trend, so the saying goes.
So news of two more big company demergers today, hot on the heels of the three-way break-up of 129-year-old US industrial giant General Electric announced on Wednesday, suggests that “doing the splits” is being looked at anew by company boards.
Toshiba, one of the best known companies in Japan, announced that it is breaking itself up – also splitting itself into three separate businesses.
One division will be focused on Toshiba’s electronics devices
The 146-year old company said one of the them would be focused on infrastructure, including products and services such as water treatment, trains, power turbines and nuclear-plant maintenance.
A second will be focused on electronic devices such as power semiconductors.
The third business, which will retain the Toshiba name, will manage the company’s stake in the flash-memory company Kioxia Holdings and other assets.
The move follows an accounting scandal six years ago – after which activist shareholders urged the company to break itself up.
The measure, however, may not go far enough with those investors that had wanted Toshiba to go private.
It received – and rejected – a takeover proposal in April from CVC, the private equity group, valuing it at $20bn.
General Electric announced a break-up earlier this week
Toshiba’s move attracted a good deal of interest since it has echoes of the GE announcement which, in turn, was at least partly inspired by similar moves two years ago by the German industrial stalwart Siemens.
Hot on the heels of that news came the announcement that Johnson & Johnson, the $429bn healthcare and consumer goods giant that is America’s 12th largest public company, is to split itself in two.
J&J, the world’s biggest healthcare company by both sales and market value, will hive off its consumer health business, the owner of brands such as Band-Aid, Listerine, Tylenol, Neutrogena and the eponymous Johnson’s baby oil, into a separate company.
The core J&J business will retain the company’s existing pharmaceuticals and medical devices businesses.
The consumer health business will be the smaller of the two but will still be a substantial company, with annual sales of $15bn a year, in its own right.
Like Toshiba, J&J has had a difficult few years, becoming embroiled in a costly legal battle with the US state of Oklahoma over its past sale of painkillers.
More recently it has been dogged by allegations – furiously denied – that its talcum powder caused cancer.
But Alex Gorsky, J&J’s chief executive, insisted that the demerger – due to take place during the next 18 to 24 months – was nothing to do with that.
Johnson & Johnson denies allegations about its talcum powder Pic: AP
He told the Wall Street Journal, which broke the story: “The best path forward to ensure sustainable growth over the long term and better meet patient and consumer demands is to have our consumer business operate as a separate healthcare company.”
As with Toshiba and GE, J&J is a stalwart of its country’s business scene.
It dates back some 135 years to when three brothers, Robert Wood Johnson, James Wood Johnson and Edward Mead Johnson, launched a business selling surgical dressings, supposedly after hearing a speech by the British surgeon and pathology and antisceptic pioneer Joseph Lister.
J&J sold the world’s first commercial first aid kits and the world’s first women’s sanitary products.
It moved into pharmaceuticals in 1959 and the more predictable cash flow from its consumer goods businesses helped finance research and development into the more up-and-down, but potentially more lucrative, drugs and medical devices businesses.
More recently, though, some investors have become unhappy at the relatively sluggish performance of the consumer goods arm.
Its sales rose by 1.1% last year while the pharmaceuticals arm grew by 8%.
Shareholders these days prefer to focus on specific sectors.
J&J boss Alex Gorsky said the demerger was the “best path forward to ensure sustainable growth”
An investor in J&J seeking exposure to its pharmaceuticals business will not, necessarily, want exposure to its consumer goods arm.
Activist investors such as Elliott, ThirdPoint, ValueAct and Starboard are now mighty beasts in the investment world, unafraid to take on some of the world’s largest companies.
No chairman or chief executive wants to see them popping up on their shareholder register.
Taking pre-emptive action, for example a demerger, is one way of avoiding costly, draw-out and debilitating battles with such investors.
J&J’s move is also in keeping with those of other big pharmaceuticals companies.
The German drugs giant Merck sold its consumer healthcare business, which owned brands including the hay fever remedy Claritin and the sun tan lotion maker Coppertone, to Bayer seven years ago.
Pfizer announced at the end of 2018 that it was merging its consumer healthcare business, the maker of Chapstick lip balm, Centrum multi-vitamins and Advil painkillers, with the consumer healthcare arm of Britain’s GlaxoSmithKline.
GSK emerged in effective control of the business and, in February last year, said it would demerge it.
J&J is going down a path previously trodden by GSK
That move effectively is the road that J&J now plans to go down.
But, as with GSK, it is not without risk.
Without the predictable cash flows of consumer healthcare products, the research and development arms of the stand-alone pharmaceuticals businesses will have to be more disciplined, channelling their resources only into work where a positive outcome can be guaranteed.
It was why Sir Andrew Witty, GSK’s former chief executive, always refused to break up the company.
His successor, Dame Emma Walmsley, decided something more radical was required.
Mr Gorsky, at J&J, has clearly reached the same conclusion.
One thing is clear: with three gigantic and storied companies – GE, Toshiba and J&J – all announcing break-ups within days of each other, demergers are very much back on the business agenda.
Consumers could be allowed to attend water company board meetings under new rules proposed by the regulator.
Companies may survey and research customers to understand their views, involve them in decision-making and seek feedback on consumers’ experience.
Under the suggested reforms by regulator Ofwat, customer voices could be heard by making changes to a company’s governing body, the board of directors.
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The obligation to hear billpayers’ views could be met by boards allocating time for consumer matters, arranging for consumer experts to attend, holding open board meetings for the public, or by having an independent director with a consumer focus.
Boards could also comply by arranging for independent consumer experts, such as the Consumer Council for Water (CCW), to regularly attend.
Topics that consumers will have to be consulted on include the cost of bills, performance of key water services, support when things go wrong – like water outages – and the company’s investment priorities.
When decisions likely to materially impact consumers are made, the water company needs to have clear processes to ensure consumers are involved, Ofwat said.
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As well as including water users in decision-making, utilities will have to work to understand how decisions impact consumers so those views are taken into account in future decisions.
Seeking this feedback must involve engaging with the new consumer panels being developed by the CCW to hold companies to account, Ofwat’s rules outline.
Why’s this being done?
It’s all part of the government’s aim to rebuild trust in the water sector and to improve accountability, transparency and performance in water firms.
The public has been outraged by record sewage outflows and polluted waterways at a time when senior executives are receiving bonuses and bills are rising.
New powers were granted to regulator Ofwat to clean up the sector, and rules on pay and bonuses were developed and took effect in June.
They’ve already been used to claw back bonuses.
What next?
Stakeholders have until 1 October to respond to the consultation, with Ofwat intending the rules take effect on existing water utilities in April.
Consultations already took place to make the suggested rules with 11,000 responses received from businesses, groups and individuals.
Not all of the replies made their way into the rules. The idea of having MPs and local authorities involved in decision-making, received from “several respondents”, appears not to have been included.
It comes despite the recent announcement of Ofwat being scrapped, as part of a once-in-a-generation review of the sector.
It and the other regulators are to be replaced by one single body.
Ofwat said it was working until new arrangements were in place and continuing to implement rules on remuneration and governance.
How’s it been received?
Environmental charity River Action said to rebuild trust in the industry, the government “needs to go a lot further than tinkering around the edges”.
“We need a complete overhaul of how water companies are owned, financed and governed. That means ending privatisation and instead operating for public benefit,” chief executive James Wallace said.
Industry group Water UK said: “It is important customers are involved in water companies’ decision-making.
“We will continue to work with government on these proposed rules and other vital reforms to secure our water supplies, support economic growth and end sewage entering our rivers and seas.”
More than 200 UK pubs closed in the first half of the year as part of a “heartbreaking” trend which industry bosses fear is set to accelerate.
Analysis of government figures revealed 209 pubs were demolished or converted for other uses over the opening six months of 2025 – around eight every week.
The South East was hit the hardest, losing 31 pubs during the period.
It means 2,283 pubs have vanished from communities across England and Wales since the start of 2020.
Industry bosses said the “really sad pattern” is being driven by the high costs faced by pubs – and called for government reforms to business rates and beer duty.
Many pubs have been hit by changes to discounts on business rates, the property tax affecting high street businesses.
Hospitality businesses received a 60% discount on their business rates up to a cap of £110,000 – but this was cut to only 25% in April.
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July 2025: ‘Not surprising pubs are closing’
Pub owners had warned such a move would place significant pressure on their industry.
Last month, the owner of a pub told Sky News “you can’t make money anymore” and “it’s not surprising so many pubs are closing at an alarming rate”.
‘Staying open becomes impossible’
A rise in the national minimum wage and national insurance payments have also increased bills for pubs.
Alex Probyn, of commercial real estate specialists Ryan, which analysed the government data, said the higher costs are “all quietly draining profits until staying open becomes impossible”.
He added: “Slashing business rates relief for pubs from 75% to 40% this year has landed the sector with an extra £215m in tax bills.
“For a small pub, that’s a leap in the average bill from £3,938 to £9,451 – a 140% increase.”
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‘A lot of these pubs never come back’
Emma McClarkin, chief executive of the British Beer And Pub Association, said: “It’s absolutely heartbreaking and there is a direct link between pubs closing for good and the huge jump in costs they have just endured.
“Pubs and brewers are important employers, drivers of economic growth, but are also really valuable to local communities across the country and have real social value.
“This is a really sad pattern, and unfortunately a lot of these pubs never come back.
“The government needs to act at the budget, with major reforms to business rates and beer duty.”
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