Toshiba Shares Slip as Bigger Stake in Chip Unit Likely Up For Sale

On Wednesday, shares in Toshiba Corp slipped after the conglomerate stated it would book a $6.3 billion hit to its U.S. nuclear unit and is selling part of its memory chip business to cover the billions it lost building nuclear power plants and as it struggles for cash to stay in business.

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On Wednesday, shares in Toshiba Corp slipped after the conglomerate stated it would book a $6.3 billion hit to its U.S. nuclear unit and  is selling part of its memory chip business to cover the billions it lost building nuclear power plants and as it struggles for cash to stay in business.

It is facing a March 27 target to avoid a delisting, Chief Executive Satoshi Tsunakawa stated he would  he would take into consideration selling most, even all of the chips business , a turnaround from the conglomerate’s prior stance that it would sell only approximately 20%.

The adjustment of direction has motivated investors to question whether the firm  would have a long-term future without control of the unit and could well shake up the bunch of suitors interested in a piece of the world’s largest  NAND chip producer after Samsung Electronics Co Ltd (KS:005930).

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

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

Taiwan’s Foxconn (TW:2317), formally identified as Hon Hai Precision Industry Co Ltd, is among the companies and funds that we are bidding for the smaller stake, a source with direct information of the offer said, but refused to be named because he is not authorized to speak to the media. Foxconn representatives were not available to comment.

Additional  bidders include SK Hynix Inc (KS:000660), Micron Technology Inc (O:MU) and private equity company Bain Capital, according to sources.

Foxconn, may find it easier than other corporate bidders to purchase  a large stake as it is not a major memory chip producer and could avoid any lengthy anti-trust review, which the previous year bought a controlling stake in Japanese panel maker Sharp Corp.

“Toshiba’s new directness toward selling more of its chips business comes as the beleaguered conglomerate failed to deliver fully audited third-quarter earnings as scheduled on Tuesday, instead saying it needed more time to look at potential problems at its Westinghouse division. The expected $6 billion writedown will also wipe out shareholders’ equity,” according to the report.

It has been approved an extension until March 14 to submit audited records, but would have to handle a delisting if it still failed to file within eight business days after that.

On Wednesday, Toshiba executives are meeting representatives from their banks to pursue their understanding and support.

As of end of September, Toshiba’s loans from banks and insurers raised at approximately 800 billion yen ($7 billion), Sumitomo Mitsui Banking Corp (T:8316) and Mizuho Bank (T:8411) are its biggest creditors, according to the reports.

While the two lenders and state-backed Development Bank of Japan Inc have so far conveyed support for Toshiba, other creditors will need additional convincing before they back Toshiba further, according to the sources familiar with the issue stated.

“Toshiba needs to come up with a convincing turnaround plan, but it’s not an easy task,” said an executive at one of the creditor banks. “And we need to make sure there are no more negative surprises,” he said.

Possible investors in Toshiba may also need to pay attention to Japanese government worry regarding the future of a company it sees as strategically significant.

“Toshiba’s flash memory business is a significant part of Japan’s economic growth strategy and its domestic nuclear business is important for reactor decommissioning and the clean up of contaminated water,” Japan’s chief government spokesman, Yoshihide Suga, said at a regular briefing on Wednesday.

In the afternoon trade, Toshiba shares slid to be down 8 percent. The company’s market value has minimized to 895 billion yen ($7.8 billion), less than half its worth in mid-December. Just under a decade ago, the company has been  worth approximately 5 trillion yen.

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