Twists and turns in Toshiba’s chip business sale
TOKYO: Toshiba Corp is unlikely to seal a long- awaited US$ 17.3 billion deal to sell its memory chip unit by its self-imposed deadline of August 31, as a lastminute offer on Wednesday left executives comparing rival offers with hours to go.
The following are key questions and answers on the protracted sale, why the delays matter and what comes next.
A consortium including Western Digital, US private equity firm KKR & Co, the state-backed Innovation Network of Japan and Development Bank of Japan is offering around 1.9 trillion yen for Toshiba’s chip business, according to people familiar with the talks.
The two sides are in final-stage discussions and had aimed to announce a deal on Thursday, when Toshiba’s board meets. But they have yet to reach a deal.
Earlier talks with another bidding group, including private equity firm Bain Capital and South Korean chip maker SK Hynix, broke down after Western Digital, which has investment in Toshiba’s main chip plant, went to court to defend its right to consent to any sale.
Sources with knowledge of the matter said that Bain had revised its offer to two trillion yen, including an investment from tech giant Apple. Toshiba has been trying to sell the unit for months, in an attempt to pay down debt and cover the impact of over US$ 6 billion in liabilities linked to US nuclear arm Westinghouse.
Toshiba wants to close the sale by the end of the fiscal year in March to ensure it does not report negative net worth, or liabilities exceeding assets, for a second year running. This could result in a delisting from the Tokyo Stock Exchange.
That would be a dramatic blow to already bruised shareholders and make it tougher for Toshiba to raise money. Given regulatory approvals could take months, the company had been hoping to reach a deal by end-August to ensure it can close the sale in time.
The consortium is offering around 1.9 trillion yen, with the US firm offering 150 billion yen through convertible bonds, according to sources.
KKR and the two Japanese funds will offer 300 billion yen each, or 900 billion in total, the sources said.
Toshiba’s lenders including Sumitomo Mitsui Banking Corp and Mizuho Bank would also extend a total of around 700 billion yen in loans, while other Japanese companies will also invest around 50 billion yen to ensure domestic firms hold a combined 60 percent stake, the sources said. — Reuters