By Takashi Mochizuki
TOKYO -- Toshiba Corp. said Friday it would put part of its semiconductor unit up for sale, seeking to stay afloat after a planned write-down of billions of dollars connected to its U.S. nuclear business.
Analysts said the sale of just under 20% of Toshiba's memory-chip business, which supplies chips to the likes of Apple Inc., could bring in more than $2 billion because of high demand for chips in products such as smartphones and computer servers.
But the sale, which Toshiba aims to complete by March 31, marks another step in the dismantling of a conglomerate once among Japan's leading companies, following an accounting scandal that broke out in 2015 and led to billions of dollars in losses. Toshiba already sold its medical-scanner and home-appliance businesses last year, leaving the chip unit as the main crown jewel left.
The company is trying to raise cash to avoid falling into negative net worth after troubles at its Westinghouse Electric Co. affiliate, which makes nuclear reactors. Toshiba has said it expects a write-down of at least several billion dollars owing to cost overruns at delayed Westinghouse nuclear power plant projects in Georgia and South Carolina. The exact figure is to be released on Feb. 14.
"We had been thinking of splitting off semiconductors to beef up our finances, and the recent nuclear write-down risk accelerated the discussion," said Toshiba's chief executive, Satoshi Tsunakawa, at a news conference Friday.
Executives had described selling thememory-chip unit as a last resort, but it became hard to avoid because the semiconductor business requires a steady flow of large capital investment.
Samsung Electronics Co., the market leader in memory chips, held a 35.5% share in revenue terms during 2016's third quarter, according to research firm IHS Markit. Toshiba, the second-largest competitor in the industry with a 19.5% share, has said it would spend Yen860 billion ($7.5 billion) for the business by March 2019, but analysts said without outside capital the target might be hard to hit with Toshiba's fragile balance sheet.
Toshiba's Mr. Tsunakawa said he intended to sell no more than 19.9% of the semiconductor unit to prevent a challenge to Toshiba's control, and he said the company didn't intend to pick rival chip makers as partners.
Toshiba's executive in charge of semiconductors, Yasuo Naruke, said selling shares in the unit to the public was a "future option."The memory-chip business had revenue of Yen845.6 billion in the year ended March 2016, according to Toshiba. It said the business's cash flow was large enough to fund future investments, but analysts said the planned sale was likely just the first round.
"No one would believe Toshiba would sell just that much and be done," said IHS analyst Satoru Oyama. "The business needs to keep raising cash to stay relevant."
In Japan, an investor with a stake of 20% or more can get representation on a company's board. Buyers would likely aim for that level of influence, analysts said.
"Toshiba's memory-chip technology is lagging behind Samsung's, but it's still valuable, so getting a peek at its production and development know-how would be valuable" for a strategic buyer, Mr. Oyama said.
Write to Takashi Mochizuki at email@example.com
(END) Dow Jones Newswires
January 30, 2017 02:47 ET (07:47 GMT)
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