Toshiba to sell part of chip business, review overseas nuclear operations

Japan's Toshiba Corp on Friday announced plans to sell about 20 per cent stake of its memory chip business and spin the memory business into a separate entity so as to generate funds to offset multi-billion dollar writedowns brought about by its overseas nuclear division.

The proceeds of the sale – expected to be around $1.7 billion -  of the run-down business may not be enough to cover the nearly $6 billion charge on the group, but the drastic measures are set to be just some of the tough choices the Japanese conglomerate will have to take to remain relevant for the investor.

Still battered by a 2015 accounting scandal, Toshiba was plunged back into crisis when it emerged late last year that it had to account for huge cost overruns at a US power plant construction business recently acquired by its Westinghouse division.

Toshiba Corporation on Friday announced its decision to split the memory chips business and spin it as a separate company. The spun off business will include the memory chips business (including the SSD, but excluding the image sensor business) of the Storage and Electronics Devices Solutions Company, one of the company's in-house companies, will be separated from the company by a company split by 31 March 2017.

Toshiba said it is currently carefully assessing the assets needed to be allocated to both companies post split and the future focus of the separated entities.

Toshiba no longer considers the nuclear division as focus business for the firm. Chief executive Satoshi Tsunakawa said Toshiba will review Westinghouse's role in new projects and whether it will embark on new power plant construction. The division will also now fall under direct CEO supervision.

Tsunakawa added Toshiba was looking to sell less than 20 per cent of its memory chip business - the world's biggest NAND flash memory producer after Samsung Electronics - which comprises the bulk of the conglomerate's operating profit.

The money is urgently needed for Toshiba, which is rushing to complete the sale by the end of the financial year in March so as to save at least $3 billion in shareholder equity, in the wake of the accounting scandal.

Toshiba expects to raise more than ¥200 billion ($1.7 billion) from the sale and potential investors include private equity firms, business partner Western Digital Corp (WDC.O) and the government-backed Development Bank of Japan, reports quoting sources said.