Toshiba to seek bids for its chip unit at $13 billion value

Bloomberg

Toshiba Corp. is sending letters soliciting offers for its memory chip business this week and seeking bids that value it at about 1.5 trillion yen ($13 billion), 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, asking not to be identified because the matter is private. A 1.5 trillion yen valuation for the whole operation would be below earlier reports the chip unit could fetch 2 trillion or 2.5 trillion yen.
Toshiba is reeling from losses in its US nuclear division and selling assets to stabilize its balance sheet. President Satoshi Tsunakawa originally sought to sell a minority stake in the highly-prized memory chips 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 the chip unit include Korea’s SK Hynix Inc., Taiwan’s Foxconn Technology Group, Western Digital Corp. and Micron Technology Inc., the people said. Among the financial bidders are Bain Capital, Silver Lake Partners and KKR & Co., they added.
Toshiba spokesman Motohiro Ajioka declined to comment about the memory chip deal. Western Digital didn’t immediately return calls and messages seeking 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 Wednesday he is “very serious” about acquiring Toshiba’s chips business. He said his company can give Toshiba financial support to build new factories in China and Foxconn is going to need more flash memory to meet demand for new products. Toshiba shares rose 1.6 percent in Tokyo trading. The stock has tumbled 25 percent 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, the person said.
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 Co. 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. The company’s estimates for capital expenditures appear to be too low to sustain the business, the person said.
Last month, Toshiba sought preliminary bids for a minority stake in the business and the other chipmakers made offers that valued the operation at between $10 billion and $13 billion, the person said. There is little reason for that valuation to change now, the person said.
So far the Japanese government has not taken a public stance on the sale. Japan’s Chief Cabinet Secretary Yoshihide Suga last month said 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 Group Inc. is advising Toshiba on the sale.