Toshiba to sell its memory chips business for $19 billion

Cash-strapped Toshiba Corporation has agreed to sell its memory chips business, its crown jewel, to  a consortium of Japanese investors and private equity fund Bain Capital for a reported $19 billion (2.1 trillion yen), helping itself to emerge from piled up losses.

The board of directors of Toshba Corporation at its meeting today decided to select a consortium of Innovation Network Corporation of Japan, Bail Capital Private Equity LP and Development Bank of Japan as preferred bidder for the sale of Toshiba Memory Corporation.

Toshiba Memory Corporation was split from Toshiba Corporation on 1 April 2017  as a wholly-owned subsidiary responsible for Toshiba's memory chips business, generate dedicated management resources for growth and bring much needed cash into the Japanese company to make up for losses in its nuclear operations.

According to Toshiba, "The consortium has presented the best proposal, not only in terms of valuation, but also in respect of certainty of closing, retention of employees and maintenance of sensitive technology within Japan."

Toshiba intends to arrive at a mutually satisfactory definitive agreement with the consortium by 28 June this year and close the transaction within March 2018, provided all clearances are in place by then.

Toshiba Corporation expects the backing by state-supported Innovation Network Corp of Japan and Development Bank of Japan would help win government approval for the sale of sensitive technology.

Minister for economy, trade and industry Hiroshige Seko welcomed Toshiba's decision.

Tokyo-based Toshiba, Japan's oldest businesses house, will still be left with more than 600 different businesses, including elevators, a general hospital and software services.

Toshiba makes everything from washing machines and medical equipment to laptops and nuclear plants.

Toshiba's Westinghouse Electric nuclear division, which led to heavy losses and drove the company to sell its premium business, however, has filed for bankruptcy after losses piled up from project delays and slow demand.

Toshiba has predicted an annual loss of 1.01 trillion yen.

While Bain, INCJ and DBJ will contribute cash and equity, South Korean chipmaker SK Hynix Inc will join the group by providing only loans to avoid antitrust hurdles, reports quoting sources familiar with the matter said.

Toshiba, however, didn't mention SK Hynix in its statement.

Other leading contender for Toshiba's chip unit included US chipmaker Broadcom Ltd, which made an offer of about 2.2 trillion yen, according to some reports.

Objections from Western Digital Corp, which jointly owns certain chip assets with Toshiba, may still complicate closure of the deal. The US company has sought to prevent the business falling into the hands of rivals and opposed Broadcom in particular.

Toshiba shares fell 1.3 per cent as of 12:57 p.m. in Tokyo. Toshiba is up about 15 per cent this year.