Cash-strapped electronics giant Toshiba Corp. is expecting to raise up to about 2.5 trillion yen by spinning off its semiconductor business and selling a 100 percent stake in the unit, it has been learned.
Toshiba is aiming to increase the sales price of the semiconductor unit by demanding a company that wants to buy a 100 percent stake in the unit pay a premium. If it is realized, Toshiba will be able to drastically improve its financial standing. But depending on the outcome of a tender, the strategy could end up being a pie in the sky.
Toshiba booked a 712.5 billion yen impairment loss on its nuclear business in the United States and its net worth is expected to plunge approximately to minus 150 billion yen at the end of March 2017. Toshiba plans to use proceeds from the sale of the healthy semiconductor unit to boost its capital in a bid to drastically strengthen its financial base. Under these circumstances, Toshiba is currently preparing to invite tenders for the semiconductor unit.
According to sources, Toshiba calculates the corporate value of the semiconductor unit at about 2 trillion yen. Toshiba plans to ask a company, which wants to acquire a 100 percent stake in the semiconductor unit, to pay a premium of about 20 to 30 percent of the corporate value on the grounds that it will be easier for the buyer to manage the new firm as there will be no minor shareholders, the sources say.
Toshiba is expecting to sell the semiconductor unit possibly for up to about 2.4 trillion to 2.6 trillion yen, the sources say. Toshiba had considered selling less than 20 percent shares in the semiconductor unit so that it could take control of the company. But Toshiba deemed it insufficient to improve its own financial standing because the initial tender did not go as well as it had expected. In the face of demands from its major creditor banks, Toshiba switched to a plan to sell a 100 percent stake in the semiconductor unit.
Nonetheless, only a limited number of companies are expected to want to acquire a 100 percent stake in the unit. After formally deciding to spin off the semiconductor business at an extraordinary shareholders' meeting at the end of March, Toshiba is to make a short list of potential buyers by mid-May when it releases its earnings for the business year ending March 2017 and complete the sale of the unit by the end of fiscal 2017 in order to pull itself out from a capital deficit. But it is unclear whether Toshiba will be able to secure favorable conditions it hopes for by holding negotiations with a fixed deadline.