Toshiba making preparations for sale of stake in chip business

TOKYO: Japan´s Toshiba Corp 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 help avoid being crippled by an upcoming multi-billion 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 - 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 authorised to speak on the matter. A Toshiba spokesman said the company may split off its memory chip business and sell a stake but it cannot comment on the specifics of the process. Silver Lake declined to comment.

Media reports have put the planned size of the stake to be sold at around 20 percent to 30 percent.

Those reports could not be immediately confirmed but sources have said that Toshiba is determined to hold onto a majority holding.

The chip business could be valued at more than 1 trillion yen ($8.7 billion), industry sources have said, although some estimates for the unit have ranged as high as 2 trillion yen.

Another potential buyer Toshiba is considering for the stake is business partner Western Digital Corp, people familiar with the matter have said.