Daily Management Review

Toshiba to sell its memory chips business for up to $ 9 billion


Toshiba plans to raise at least 1 trillion yen ($ 8.83 billion) from sale of its stake in the microchips business, Reuters reported, citing sources.

The sale will be completed by the end of March next year, said the agency’s source. It was reported earlier that Toshiba plans include sale of more than 20% of the business for up to 200 billion yen, which is equivalent to $ 1.7 billion.

"Sale of a controlling stake in the semiconductor division is the only way to attract significant funds, which will help remove existing concerns about Toshiba’s credit" - said the agency.

According to the edition, Toshiba is still not sure what share to sell. The company is now focused on the amount to be gained as a result of the transaction. Nevertheless, the Japanese vendor would like to reserve one third of units that will allow the company to somehow maintain control over the business.

Toshiba has announced its readiness to sell its most valuable asset after learning about forthcoming write-off of $ 6.3 billion in the US unit Westinghouse Electric.

Toshiba’s semiconductor business is the world’s second by size. According to IHS agency, Toshiba controls 20,4% of the world NAND flash memory market in terms of revenue, being second after Samsung Electronics (34.9% share).

In April-September 2016, operating profit of Toshiba semiconductor division was 78.3 billion yen ($ 692 million), an increase by half compared with the same period of the previous year. Annual turnover of the sold units was approximately $ 7.5 billion. This business generates 81% of all corporate profits.

"Typically, a financial recovery plan implies that a company keeps the most competitive business, selling unprofitable units. Toshiba’s recovery plan leaves no hope for the company’s future", - says Masayuki Kubota of Rakuten Securities.

Toshiba should sign the deal and raise funds before the end of March 2017, otherwise damages on the basis of financial year will exceed total assets of the company. This, in turn, may result in expelling the company’s shares from Tokyo Stock Exchange (TSE).

List of contenders for purchase of the assets, according to Reuters, includes Foxconn Electronics, SK Hynix and Micron Technology, as well as private equity funds, such as Bain Capital. The publication notes that the deal with Foxconn could become the fastest since the Taiwanese company does not manufacture memory chips, so that Toshiba could avoid additional antitrust audits.

Toshiba opened sale of the profitable business after learning about a loss related to acquisition of American company Westinghouse Electric, which operates in the field of nuclear energy. In December 2015, Westinghouse Electric bought Chicago Bridge & Iron's for $ 229 million. The losses from these transactions, according to Toshiba analysts, amounted to about 100 billion yen. Toshiba promises to reveal more exact amount of damages during publication of the quarterly report, scheduled for February 2017. 

World's leading manufacturer of flash memory is Samsung Electronics, which controls about one-third of the total market is $ 30 billion. In second place is Toshiba (about 20%), followed by Western Digital, Micron and Hynix. 

source: reuters.com

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