Toshiba to sell part of chip business

Toshiba Corp. said it would sell a minority stake in its memory chip business as it urgently seeks funds to offset an imminent multi-billion dollar writedown, adding that its overseas nuclear division — the cause of its woes — was now under review.
The drastic measures are set to be just some of the tough choices the Japanese conglomerate will have to take as proceeds from the sale are likely to only cover part of a charge that domestic media has put at $6 billion.
Still battered by a 2015 accounting scandal, Toshiba was plunged back into crisis when it emerged late last year that it had to account for huge cost overruns at a US power plant construction business recently acquired by its Westinghouse division.
Describing the nuclear division as no longer a central business focus for the firm, Chief Executive Satoshi Tsunakawa said Toshiba would review Westinghouse’s role in new projects and whether it will continue with US power plant construction. The division will also now fall under direct CEO supervision.
Tsunakawa added Toshiba was looking to sell less than 20 percent of its memory chip business — the world’s biggest NAND flash memory producer after Samsung Electronics — which comprises the bulk of the conglomerate’s operating profit.
The firm is rushing to complete the sale by the end of the financial year in March as failure to do so will likely mean that shareholder equity — just $3 billion in the wake of the accounting scandal — would be wiped out by the charge.
Sources have said Toshiba aims to raise more than 200 billion yen ($1.7 billion) from the sale and potential investors include private equity firms, business partner Western Digital Corp. and the Development Bank of Japan.
It is also selling other assets although it ruled out the sales of any of its infrastructure businesses — which include water treatment, railway and elevator firms.
Toshiba also said it may eventually list the memory chip business.
Executives declined to comment on the size of the writedown, which will be announced on Feb. 14 when Toshiba reports third-quarter results.
Mark Newman, an analyst at Sanford Bernstein in Hong Kong, said a stake sale would likely be a only short-term band-aid.
“The NAND business is the only one with value, as it makes up all of the semi-conductor profits, which comprise 75 percent of the overall company’s profit. I will not be surprised if they sell another 20 percent in a few years time and then another 20 percent.”
Sources have said many private equity funds, including Silver Lake and Permira, have signed non-disclosure agreements with Toshiba. But it remains to be seen how well the sale will go given the end-March deadline and caution on the part of potential investors. Business weekly Toyo Keizai reported that Taiwan’s Foxconn, the world’s largest contract manufacturer, is interested in either taking a stake in or buying some of Toshiba’s businesses.

Source: Arab News