Splitsville: Toshiba prepares to lose its memory

Business being split off so stakes can be sold

Arnie Total Recall

Toshiba confirms its memory business will be separated from the main Toshiba business in preparation for a part or majority stake sale.

The memory business, which is part of Toshiba’s Storage and Electronic Devices Solutions Company, includes Toshiba’s SSD operation (development, manufacturing and sales) but not its image sensor business. It will be separated off in a company split process, and approval for this is needed at Toshiba’s extraordinary general meeting of shareholders on March 30. The effective data for the split will then be April 1.

The background to this is Toshiba’s multi-billion losses in its US Nuclear power station business and need to raise additional capital, by selling a stake or stakes in the memory business. Spinning it off is a necessary part of this process.

The company states:

Toshiba’s Memory business is a business where timely investments, accelerated development time and the ability to ramp-up the production of large capacity, highly reliable 3D memory devices (BiCS FLASH) are essential to meet the growing demand for storage. Splitting off the Memory business into a single business entity will afford it greater flexibility in rapid decision-making and enhance financing options, which will lead to further growth of the Memory business.

Toshiba confirms it is considering selling part of the split-off business to “third-party capital, including potential sale of a majority stake”.

It will make a final decision in early fiscal 2017, meaning, we think, the June-August 2017 period. Analyst Aaron Rakers writes the spun-off Toshiba Memory Corporation will have ¥753.7bn of total assets (circa $6.7bn, £5.4bn), ¥161.4bn in total liabilities (circa $1.4bn, £1.2bn) and it generated ¥845.6bn in sales (circa $7.5bn, £6.1bn) in Toshiba’s fiscal 2-15 (ending March 2016).

Technically the spinning off is by an absorption-type company split method with Toshiba being the splitting company and Toshiba Memory Corporation becoming the succeeding company, with Toshiba holding all the shares until some or most are sold to a third-party or parties.

Parties interested in buying a stake have been reported to include Bain Capital, SK Hynix, Tsinghua Unigroup and WD. ®

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