Toshiba Sticks To Chip Sale Plan Despite Regulatory Issues

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Toshiba’s newly appointed Chief Executive Officer and Chairman, Nobuaki Kurumatani, has reiterated the company’s goal of divesting itself of its chip business even in the midst of regulatory battles it is currently facing. Toshiba signed a Memorandum of Understanding (MoU) with Bain Capital in September last year to sell its NAND memory chip division to the consortium led by the Boston, Massachusetts-based private equity firm.

The MoU signifies the completion of the negotiation process for the sale of the chip unit for 2 trillion yen, which translates to $18 billion. The transaction was initially expected to conclude last March 31, though China’s move to delay its approval of the deal has left the sale process in pending status. Now the transaction has until April 13 to secure the requisite regulatory clearance to meet the new deadline for closing the deal on May 1 as part of its agreement with the Bain Capital-led group. It is understood that Toshiba is resolved to close the deal as soon as possible as the Japanese conglomerate is reeling from a huge cash crunch after its U.S. nuclear business Westinghouse Electric Company filed for bankruptcy early last year. The company was also pressured by the Tokyo Stock Exchange to recover from the negative shareholder equity, with a threat of being delisted. However, that is no longer the case now after the company sold 600 billion yen of new stock and is also in talks to sell its nuclear business for 410 billion yen, according to a report from Bloomberg.

At present, Toshiba is waiting for China’s decision on an antitrust approval filed by Bain Capital in the country last year as the final step in the transaction. Kurumatani, however, explained that if China refuses to approve the deal, it will be considered as what he calls “material change”, which will allow Toshiba to end the sale process and resort to other options such as renegotiating the deal for a higher price or filing an initial public offering for the chip business. It was reported shortly after the signing of the MoU that majority of Toshiba’s directors were supposedly more inclined toward favoring the bid from a Western Digital-led consortium, though it would have raised antitrust concerns in the country since the group is backed by direct rivals of Toshiba’s chip division.