March 18, 2017 7:00 am JST

Tokyo weighs public-private alliance for Toshiba chip bid

Joint offer would limit risk of ceding vital technology

TOKYO -- A proposal has been floated here to make a joint bid for Toshiba's memory chip business by a Japanese consortium and select foreign partners to split the hefty purchase price while safeguarding key technologies -- a concern for Tokyo.

Toshiba's liabilities are all but certain to exceed its assets when the current fiscal year ends March 31. Besides selling its memory operations, the crisis-bound group is also considering taking overseas nuclear operations off its consolidated books, a measure that would pile on additional charges.

"However you look at it, our continuation requires a huge amount of money," a senior executive said.

Memory chips, the last of Toshiba's prime assets, are expected to fetch 1.5 trillion yen to 2 trillion yen ($13.3 billion to $17.7 billion) -- more than twice the 600 billion yen-plus that Canon paid last year for Toshiba Medical Systems. This would be one of Japan's largest such deals.

More than 10 parties, including investment funds, have expressed interest in participating in the first round of bidding, set to wrap up late this month. But such a massive purchase would be tough for a single buyer to afford. One fund described partnering with a nonfinancial company as an option.

With Asian money from beyond Japan in particular expected to face a high hurdle amid Japanese concerns about technology and talent outflows, prospective foreign buyers are reaching out to the government. South Korea's SK Hynix is sounding out the possibility of a partnership with the state-backed Development Bank of Japan and the public-private Innovation Network Corp. of Japan, hoping to ease Tokyo's worries.

The DBJ is drawing up a proposal for an all-Japanese alliance, which would include the INCJ as well as Toshiba customers and suppliers. Even if non-Japanese buyers acquired a majority of the memory unit, holding at least 34% of voting rights would grant this alliance veto power over major management decisions.

As for who would take the majority stake, "teaming up with American funds or businesses would be best," a DBJ source said, indicating that the bank remains leery of Asian partners.

Such a multiple-buyer arrangement could net Toshiba less money, since smaller stakes offering less control over management are not as appealing as an outright purchase. With so many conflicting interests, negotiating the sale looks fraught with difficulty.

(Nikkei)

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 8,047.41M
Shares: 4,237.6M

Canon, Inc.

Japan

Market(Ticker): TKS(7751)
Sector:
Industry:
Electronic Technology
Electronic Equipment/Instruments
Market cap(USD): 42,532.3M
Shares: 1,333.76M
Asia300

SK hynix, Inc.

South Korea

Market(Ticker): KRX(000660)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 33,372.5M
Shares: 728.00M

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