Toshiba to spin off its cash-cow chip business

Lucy Hill
January 28, 2017

Toshiba (TOSYY) said Friday it will spin off a part of its chip business in a bid to strengthen its finances eroded by the greater-than-expected loss resulting from the acquisition of its USA nuclear unit.

Its flash memory operation will be turned into a separate company at the end of March, pending approval at an extraordinary shareholders' meeting, the Japanese industrial conglomerate said. "I won't be surprised if they sell another 20 percent in a few years time and then another 20 percent".

"We had been thinking of splitting off semiconductors to beef up our finances, and the recent nuclear write-down risk accelerated the discussion", said current chief executive, Satoshi Tsunakawa, at a news conference Friday.

The proceeds are set to cover part of the charge for cost overruns at a newly acquired U.S. power plant construction business which is thought to be about $6 billion. The company is looking for an injection to offset, or partially offset, a potential goodwill write-down of "several billion USA dollars" related to Westinghouse's acquisition of CB&I Stone & Webster.

Toshiba's chip business is worth an estimated $9bn, second only to Samsung in terms of size globally.

The logo of Toshiba is seen in Kawasaki near Tokyo Friday Jan. 27 2017. Toshiba Corp. says it will split its lucrative flash memory business to make up

It wants to complete the sale by the end of the financial year in March to stop shareholder equity from being wiped out by the charge.

The board of the troubled Tokyo-based electronics-to-nuclear group approved selling the memory business within its storage & electronics devices solutions segment, including the SSD business, but will retain its image sensor business.

Canon Inc. Chairman Fujio Mitarai also said last week that the maker of printers, cameras and office equipment is considering buying a stake in the spun-off company.

The Tokyo Stock Exchange has already put Toshiba shares on its watch list, making it hard to tap equity markets to bolster its capital.

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