Toshiba making preparations for sale of stake in chip business -sources

Fri Jan 20, 2017 2:40pm EST
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By Kentaro Hamada and Makiko Yamazaki

TOKYO (Reuters) - Japan's Toshiba Corp (6502.T: Quote) has begun preparations to sell a minority stake in its core chip business, people with knowledge of the matter said, as it urgently seeks funding to avoid being crippled by an upcoming multibillion-dollar writedown.

The industrial conglomerate has distributed non-disclosure agreement forms to various funds including private equity firm Silver Lake, said one of the people.

Its semiconductor business - the world's second-biggest NAND flash memory producer after Samsung Electronics Co Ltd (005930.KS: Quote) - is Toshiba's crown jewel, accounting for the bulk of its operating profit.

Facing a writedown on its U.S. nuclear business that media have reported could be $6 billion, selling part of the chip business is one of the few options left open to Toshiba, still battered by a 2015 accounting scandal.

Toshiba is rushing to split off its chip division and complete a stake sale by the end of the financial year in March as a massive writedown could wipe out shareholders equity that has shrunk to just $3 billion in the wake of the scandal, separate sources said.

"Toshiba is desperate to avoid falling into negative net worth," said one of the people.

After being put on the Tokyo bourse's watchlist in the wake of the scandal, it is unable to tap equity markets.

Sources declined to be identified as they were not authorized to speak on the matter.   Continued...

FILE PHOTO - Workers prepare the new year's eve numerals above a Toshiba sign in Times Square in Manhattan, New York City, U.S., December 26, 2016.  REUTERS/Andrew Kelly/File Photo