Toshiba to sell ‘minority stake’ in chip business to Western Digital

The Dollar Business Bureau

Japanese conglomerate Toshiba Corporation is in discussion to sell a minority stake in its well-performing flash memory division to the US maker Western Digital Corporation in a bid to raise funds, according to a source.

Earlier, in a statement, Toshiba said that it had been looking for several options for its flash memory business, even a spin-off, but nothing firm had been decided.

The laptops-to-engineering multinational, still coping with an accounting scandal of $1.3 billion, surprised its investors last month by declaring cost overruns at the US nuclear business it acquired in 2015, which could at present mean a charge against profit reaching $4 billion.

The Tokyo-based company does not have any options on hand to mitigate the impact of the write down that can wipe out the equity of its shareholders. It is impossible for the company to raise capital from financial markets as it is on the watch list of Tokyo Stock Exchange. The only ways out are the spin-off of its well-performing chip business and a stake sale.

“It is correct that we are talking a spin-off of our flash memory business, however, nothing concrete has been decided,” Toshiba said in a statement when the Nikkei business daily reported the company was considering a take sale earlier on Wednesday. The chips business of the company generates most of its operating profit.

Though it is not confirmed whether Toshiba was looking to sell around 20% in the business to Western Digital for around $2.7 billion as reported by Nikkei, a source said that the two firms were in discussion for a sale of ‘minority stake’.

Western Digital Corp, a California-based data storage firm, manages a NAND flash memory unit in the Yokkaichi city in Mie region with Toshiba Corp.

According to IHS Markit, in April-June period last year, Toshiba had a 20.4% share in the global market for NAND flash memory in terms of revenue, after Samsung Electronics which had a market share of 34.9%.

During April-September 2016, Toshiba recorded an operating profit of 78.3 billion yen from its chips and devices unit, making up around 81% of the company’s overall operating profit.