A struggling Toshiba is to spin off its memory business and sell a stake in it as it tries to cover a multi-billion dollar write down on its nuclear power subsidiary.
With an expected asset impairment loss of up to ¥700 billion ($6.08 billion), the conglomerate has said that it is looking at what it can sell of its myriad businesses.
Nuclear fire sale
“We will do whatever it takes, including increasing capital,” Toshiba chief executive Satoshi Tsunakawa told reporters. “I really feel responsible.”
The memory business of the Storage & Electronic Devices Solutions Company of Toshiba will be spun out by March 31, including its SSD division, but not its image sensing one. In late March, it will then hold “an extraordinary general meeting of shareholders” to seek approval for the action.
Tsunakawa said that Toshiba is looking to sell less than 20 percent of this business, which could be worth more than 200 billion yen ($1.7 billion). Reuters reports that potential investors include private equity firms Silver Lake and Permira, business partner Western Digital, and the government-backed Development Bank of Japan.
Analysts, however, caution that the speed of the sale may make things difficult - Western Digital, in particular, would likely have to go through antitrust regulatory processes ahead of an acquisition.
The sudden sale of one of its core businesses comes as Toshiba reels first from the 2015 accounting scandal that is thought to have wiped about $8 billion off of its market value, and more recently a disastrous turn of events at its majority-owned nuclear power division.
And the end of last year it was revealed that Toshiba’s Westinghouse Electric Company had to account for huge cost overruns at its recently acquired CB&I Stone & Webster construction business.
Toshiba originally bought Westinghouse in 2006 for $5.4 billion, and in 2015 it took a $2.3 billion write-down on the acquisition. That same year, the subsidiary picked up CB&I Stone & Webster for $229 million.
Already a troubled business due to the falling price of energy due to shale gas, and the global reaction to the Fukushima meldown in 2011, it appears that the CB&I Stone & Webster acquisition was rather ill timed - several of the company’s projects are behind schedule and over budget.
“Westinghouse has found that the cost to complete the US projects will far surpass the original estimates, mainly due to increases in key project parameters, resulting in far lower asset value than originally determined,” Toshiba said late last year.
To cover this write down, which is thought to be as much as ¥700 billion ($6.08 billion), but will be fully valued on February 14, Toshiba is looking to sell more than just its memory business.
The Asahi newspaper reports that the Toshiba General Hospital is up for sale, while Macquarie and Morningstar Investment Services believes that Toshiba Elevator & Building Systems is being considered for sale, Bloomberg reports.
Also potentially on the chopping block are Toshiba’s stakes in publicly traded subsidiaries, such as point of sale equipment maker Toshiba TEC Corp, chip-equipment manufacturer NuFlare Technology, power generation infrastructure firm Toshiba Plant Systems & Services Corp., and industrial tool maker Toshiba Machine.