New York/Tokyo — Toshiba is sending letters soliciting
offers for its memory chip business this week and seeking bids that
value it at about ¥1.5-trillion ($13bn), according to people familiar
with the matter.
The Japanese conglomerate is offering a majority stake in the chip unit and would be willing to sell the entire business, said the people, who asked not to be identified because the matter is private. A ¥1.5-trillion valuation
for the whole operation would be below earlier reports the chip unit could fetch between ¥2-trillion and ¥2.5-trillion.
Toshiba is reeling from losses in its US nuclear division and selling assets to stabilise its balance sheet. President Satoshi Tsunakawa originally sought to sell a minority stake in the highly prized memory chip business, but has been forced to give up control because of the financial troubles. Whatever money it raises from the sale, Toshiba will likely be dropped from the first tier of the Tokyo Stock Exchange.
Potential bidders that have expressed interest in the chip unit include Korea’s SK Hynix, Taiwan’s Foxconn Technology, Western Digital and Micron Technology, the people said. Among the financial bidders are Bain Capital, Silver Lake Partners and KKR.
Toshiba spokesman Motohiro Ajioka declined to comment about the memory chip deal. Western Digital didn’t immediately return calls or respond to messages looking for comment. Micron and Silver Lake declined to comment. Hynix has said previously it is interested in Toshiba’s chips business.
Foxconn founder Terry Gou said on Wednesday that he is "very serious" about acquiring the Toshiba chip business. He said his company can give Toshiba financial support to build new factories in China and that Foxconn is going to need more flash memory to meet demand for new products.
Toshiba shares rose 1.6% in Tokyo trading. The stock has tumbled 25% this year.
Foreign buyers are under consideration in the chip sale, but will have to abide by requirements to maintain employment and keep production in Japan, one of the people said. Toshiba views financial buyers as more likely winners because they would probably be able to secure regulatory approval more easily.
Bidders that already produce flash memory chips would face anti-trust scrutiny, which may slow down completion and delay the cash Toshiba needs. Samsung Electronics is the largest provider of memory chips, followed by Toshiba. Western Digital, Micron and Hynix are all smaller players in the market.
Toshiba may struggle to get the ¥1.5-trillion valuation for its chips business despite the broad interest, one of the people said, because the company’s estimates for capital expenditures appear to be too low to sustain the business.
Last month, Toshiba sought preliminary bids for a minority stake in the business and the other chip-makers made offers that valued the operation at between $1bn and $13bn, the person said, and there is little reason for that valuation to change now.
So far, the Japanese government has not taken a public stance on the sale. Japan’s chief cabinet secretary Yoshihide Suga said last month that flash memory chips — used in smartphones and solid-state disk drives — are an "extremely important" technology for the nation’s growth strategy.
Toshiba is aiming to complete the transaction by March 2018. Goldman Sachs is advising Toshiba on the sale.
Bloomberg
The Japanese conglomerate is offering a majority stake in the chip unit and would be willing to sell the entire business, said the people, who asked not to be identified because the matter is private. A ¥1.5-trillion valuation
for the whole operation would be below earlier reports the chip unit could fetch between ¥2-trillion and ¥2.5-trillion.
Toshiba is reeling from losses in its US nuclear division and selling assets to stabilise its balance sheet. President Satoshi Tsunakawa originally sought to sell a minority stake in the highly prized memory chip business, but has been forced to give up control because of the financial troubles. Whatever money it raises from the sale, Toshiba will likely be dropped from the first tier of the Tokyo Stock Exchange.
Potential bidders that have expressed interest in the chip unit include Korea’s SK Hynix, Taiwan’s Foxconn Technology, Western Digital and Micron Technology, the people said. Among the financial bidders are Bain Capital, Silver Lake Partners and KKR.
Toshiba spokesman Motohiro Ajioka declined to comment about the memory chip deal. Western Digital didn’t immediately return calls or respond to messages looking for comment. Micron and Silver Lake declined to comment. Hynix has said previously it is interested in Toshiba’s chips business.
Foxconn founder Terry Gou said on Wednesday that he is "very serious" about acquiring the Toshiba chip business. He said his company can give Toshiba financial support to build new factories in China and that Foxconn is going to need more flash memory to meet demand for new products.
Toshiba shares rose 1.6% in Tokyo trading. The stock has tumbled 25% this year.
Foreign buyers are under consideration in the chip sale, but will have to abide by requirements to maintain employment and keep production in Japan, one of the people said. Toshiba views financial buyers as more likely winners because they would probably be able to secure regulatory approval more easily.
Bidders that already produce flash memory chips would face anti-trust scrutiny, which may slow down completion and delay the cash Toshiba needs. Samsung Electronics is the largest provider of memory chips, followed by Toshiba. Western Digital, Micron and Hynix are all smaller players in the market.
Toshiba may struggle to get the ¥1.5-trillion valuation for its chips business despite the broad interest, one of the people said, because the company’s estimates for capital expenditures appear to be too low to sustain the business.
Last month, Toshiba sought preliminary bids for a minority stake in the business and the other chip-makers made offers that valued the operation at between $1bn and $13bn, the person said, and there is little reason for that valuation to change now.
So far, the Japanese government has not taken a public stance on the sale. Japan’s chief cabinet secretary Yoshihide Suga said last month that flash memory chips — used in smartphones and solid-state disk drives — are an "extremely important" technology for the nation’s growth strategy.
Toshiba is aiming to complete the transaction by March 2018. Goldman Sachs is advising Toshiba on the sale.
Bloomberg
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