Toshiba eyes stake sale in
chip business as writedown looms: source
Send a link to a friend
[January 18, 2017]
By Makiko Yamazaki and Kentaro Hamada
(Reuters) - Toshiba Corp wants to sell a minority stake in its core
semiconductor business and is considering potential buyers including
U.S. partner Western Digital Corp, a source said, as the Japanese group
prepares for a multi-billion-dollar writedown.
The laptops-to-engineering conglomerate, still recovering from a $1.3
billion accounting scandal two years ago, shocked investors in December
by announcing major cost overruns at a U.S. nuclear business it bought
in 2015. That could now mean a charge against profit topping $4 billion.
The exact scale of that number is due to be made final next month,
Toshiba, still on the Tokyo Stock Exchange watchlist after the 2015
scandal, does not have many options to offset the impact of a writedown
of that size, which could wipe out shareholder equity.
Analysts and investors have expected a spin-off and a part-sale of the
profitable chips business to be part of any solution, potentially along
with other, smaller asset sales.
"It is true that we are discussing a spin-off of our memory chips
business, but nothing has been decided," Toshiba said in a statement on
Wednesday, after the Nikkei business daily reported the firm was
considering such a move.
The chips unit generates most of the Japanese firm's operating profit.
While Toshiba did not confirm whether it was looking to sell around 20
percent in the unit to Western Digital at a price in a range of $1.76
billion to $2.7 billion, as Nikkei reported, a source briefed on the
matter said Toshiba and Western Digital were in talks for a "minority
The two companies jointly operate a NAND flash memory plant in the city
of Yokkaichi in Mie prefecture.
"Toshiba doesn't have any other options. I have an impression that this
deal is their last-ditch measure," said Yasuo Sakuma, portfolio manager
and executive officer at Bayview Asset Management Co.
[to top of second column]
The logo of Toshiba Corp is pictured at its headquarters in Tokyo,
Japan, August 31, 2015. REUTERS/Yuya Shino/File Photo
Industry sources told Reuters that Toshiba could also ask funds to invest in the
chips business, a unit that sources have said could be valued at more than 1
trillion yen ($8.9 billion). One analyst at a foreign investment group estimated
on Wednesday a valuation of 2 trillion for the unit.
"There are several candidates for investment," one of the sources said, without
Toshiba is also currently in talks with its creditor banks, who are expecting
details on the writedown over the coming days. It is not clear what guarantees
the banks have sought.
The Japanese company is aiming to complete the spin-off by the end of March, the
sources said, adding Toshiba could eventually list the unit but would retain a
majority stake in a unit that, while cash intensive, is also a key growth
According to researcher IHS, Toshiba had a 20.4 percent share in the global NAND
flash memory market in April-June last year in terms of revenue, ranking second
after Samsung Electronics which had a 34.9 percent share.
The combination of Toshiba and California-based data storage company Western
Digital would create a new industry leader.
Western Digital did not immediately respond to requests for comment on a deal.
Toshiba shares closed up 2.4 percent, versus a 0.4 percent gain in the benchmark
The company reported an operating profit of 78.3 billion yen from its chips and
devices business over April-September 2016, accounting for 81 percent of its
total operating profit.
(Additional reporting by Laharee Chatterjee and Yoshiyuki Osada; Editing by
Himani Sarkar and Muralikumar Anantharaman)
[© 2017 Thomson Reuters. All rights
Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.