Toshiba Wants Out of the Chip-Making Business, and Fast
The company said Friday that it is currently seeking an investor to acquire a less than 20 percent stake in the unit as it seeks to offset losses incurred from a multi-billion dollar write-down in its U.S. nuclear business.
According to reports, the company is hoping the stake sale will generate as much as $1.7 billion for the company. But the stake sale may be only the beginning, as Toshiba may eventually seek to either sell the unit off entirely or take it public.
Major Shakeup for the NAND Market
The move is likely to significantly shake up the memory chip sector. Toshiba is the second-largest producer of NAND flash memory after Samsung electronics, and the unit generates the majority of the company’s overall profits.
The division could prove attractive to a number of strategic and financial buyers, thanks to its role in producing the microchips that power everything from smartphones to digital cameras. Foxconn, for example, is reported to be interested in acquiring microchip production assets to build up its display business.
Western Digital may be another natural acquirer for the stake, given that it already operates a NAND plant with Toshiba in Japan. Canon, another Japanese company that uses Toshiba’s chips in its digital cameras, has already expressed interest in the stake. Canon also acquired a medical device unit that Toshiba sold in 2015, and that history may help grease the wheels for a second purchase.
Not Much Time To Sell
But while Toshiba said it values the unit at anywhere from $9 billion to $13 billion, it may have trouble obtaining the price it wants, given the timing of the situation. Toshiba is under the gun to raise capital to offset its write-down, and the company has set a deadline of March 31 by which to offload the stake.
That doesn’t leave much time for potential bidders to complete their due diligence while still engaging in a bidding war. And suitors may take advantage of the pressure on Toshiba to drive the price of the stake down.
Meanwhile, Toshiba’s position as one of the world’s largest NAND flash memory makers will also likely complicate the sale from a regulatory standpoint. Whatever company acquires the stake will immediately receive an enormous piece of the global NAND flash memory business.
Regulators are sure to take a hard look at any potential investors that already have footholds in the market. Additionally, the size of Toshiba’s business will probably make it impossible for any of the larger players in the sector, such as Samsung, to acquire the unit. That may make an acquisition by a financial buyer, such as a private equity company, more likely.