Toshiba may cash in chips business

Shares in Toshiba skidded on Wednesday after the conglomerate said it would book a $6.3bn hit to its US nuclear unit and may sell a majority stake in its prized flash-memory chip unit as it scrambles for cash to stay in business.

Facing a March 27 deadline to avoid a delisting, CE Satoshi Tsunakawa said he would consider selling most, even all, of the chips business — a turnaround from a previous stance that it would sell only about 20%.

The change of direction has prompted investors to question whether the company would have a long-term future without control of the unit and could shake up the line of suitors keen on a piece of the world’s biggest NAND chip producer after Samsung Electronics.

NONPERFORMING

“Usually in a corporate turnaround plan, the company would keep its most competitive business after selling nonperforming businesses,” said Masayuki Kubota, chief strategist at Rakuten Securities.

“This turnaround plan gives no hope for Toshiba’s future.”

Taiwan’s Foxconn, formally known as Hon Hai Precision Industry, is among those bidding for the smaller stake, a source with knowledge of the offer said, declining to be identified because he is not authorised to talk to the media. Foxconn officials were not available to comment at the time of publication. Other bidders include SK Hynix, Micron Technology and private equity firm Bain Capital, sources have said previously.

Toshiba’s new openness towards selling more of its chips business comes as the beleaguered conglomerate failed to deliver audited third-quarter earnings as scheduled on Tuesday. The expected $6bn writedown will also wipe out shareholders’ equity.

INVESTORS QUESTION WHETHER THE FIRM WOULD HAVE A LONG-TERM FUTURE WITHOUT CONTROL OF THE UNIT

It has been granted an extension until March 14 to submit audited figures.

Toshiba shares slid 9%, giving it a market value of ¥889bn (R101.9bn), less than half its value in mid-December.

At a meeting with its creditors on Wednesday, Toshiba executives asked for an extension of a waiver for a loan covenant violation until the end of March, financial sources said.

Cuts to credit ratings after Toshiba warned in December of a large writedown put it in violation of one loan covenant, which could prompt lenders to call in loans early.