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Toshiba attracting more potential bidders for chips unit

Mar 17 2017 19:02
Bloomberg: Pavel Alpeyev, Takahiko Hyuga and Takako Taniguchi

Tokyo - Toshiba’s memory chips business is attracting more potential bidders ahead of an end-March deadline, including Japanese government-backed entities, people with knowledge of the matter said.

The Development Bank of Japan is considering a joint offer with US financial bidders, people familiar with the matter said, asking not to be identified discussing a private matter.

The electronics conglomerate is seeking a sale of the prized unit to make up for a multibillion-dollar write down in its nuclear operations.

The semiconductor business is Toshiba’s crown jewel and makes the memory chips that go into personal computers, smartphones and data centres. It accounted for about 25% of Toshiba’s ¥5.67trn in revenue during the latest fiscal year.

The shares of Toshiba rose 3.5% in Tokyo on Friday. The stock is down 33% this year after unveiling the potential losses in late December.

Late on Thursday, a Toshiba executive said he would welcome a bid from Innovation Network of Japan.

INCJ and DBJ are considering a joint bid to take more than a 30% stake, the Yomiuri newspaper reported, but Chief Cabinet Secretary Yoshihide Suga immediately poured cold water on the speculations, telling reporters in Tokyo that Japan is not considering the use of public funds for Toshiba.

Kaori Hiraki, a spokesperson for Toshiba, declined to comment on the progress of chip unit sale and possible bidders. Representatives for DBJ and INCJ declined to comment.

The number of interested parties, which already include semiconductor makers and investments funds, may increase beyond the current 10 and the company expects final bids by March 29, the executive said.

Western Digital, SK Hynix, Foxconn Technology Group, Micron Technology Inc. and Kingston Technology are among those interested, one of the people said.

On March 2, Foxconn founder Terry Gou said he is "very serious" about making a bid for the memory chip business.

Representatives for Kingston, Western Digital and Micron declined to comment. Foxconn’s public relations department didn’t immediately respond to requests for comment.

The bids could range from ¥700bn to ¥1.8trn ($6.2bn to $15.9bn), one of the persons said. Toshiba, which is willing to sell off a majority stake in the unit, is seeking bids that value the entire business at ¥1.5trn.

Toshiba is struggling to regain its footing after disclosing an estimated loss of ¥712.5bn in Westinghouse Electric.

The Tokyo-based company has had to delay its earnings announcement twice, and has also floated the possibility of selling off the nuclear operations.

Financial bidders may be likely but they will probably submit offers closer to the deadline, the executive said. Among the financial bidders are Bain Capital, Silver Lake Partners and KKR & Co, people familiar with the matter have said.

The Toshiba executive declined to clarify whether the government-backed group is the Japanese company that is said to have expressed interested. INCJ was created in 2009 with majority government ownership and a mandate to promote the next generation of technologies and companies.

The fund put money into Renesas Electronics, which was formed in 2010 from the struggling semiconductor operations of several Japanese companies.

INCJ later created Japan Display Inc. from the troubled screen making units of Toshiba, Sony, and Hitachi.

Toshiba has said it aims to complete the sale of the chips business by March 2018. Its three main lenders have agreed to extend support to the company in the meantime, according to two people familiar with the matter.

Toshiba met with the banks on Wednesday, asking for extension of its loans through April and offering equity and real estate as collateral, the people said.

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