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Business deals

Toshiba Memory plans $5bn share buyback ahead of IPO

Chipmaker to use bank loans to repurchase shares from Apple and others

Toshiba Memory is preparing for an IPO by March 2020.   © Reuters

TOKYO -- Key semiconductor maker Toshiba Memory will buy back 38% of its preferred stock from investors including Apple and Dell for 530 billion yen ($4.7 billion) as part of preparations for an initial public offering by March next year, the Nikkei has learned.

The chipmaker plans to fund the purchase by borrowing a total of 1 trillion yen from Japanese banks. The move will pave its way for a stock listing within fiscal 2019 that ends March 31.

The chipmaking industry is facing a slump in smartphone sales, a sharp fall in cryptocurrency demand, a broad economic slowdown and worries over the U.S.-China trade dispute. For Toshiba Memory investors, the share buyback plan could be a good opportunity to sell out.

Toshiba Memory was sold by its holding company Toshiba last year to Japan-U.S.-South Korea alliance led by Bain Capital. Toshiba made the difficult decision of selling its crown jewel in order to cover massive losses from the bankruptcy of its U.S. nuclear power subsidiary Westinghouse Electric and rescuing the company from being delisted.

Toshiba Memory, on the other hand, plans to list its shares on the Tokyo Stock Exchange in part to finance capital spending. A person in the financial industry told the Nikkei: "Conditions will be unfavorable for the chipmaker if it tries to go public while a lot of their business partners hold the company stock."

The Development Bank of Japan will lend it about 300 billion yen. Along with the loans from the megabanks, Toshiba Memory will have a total of 1.3 trillion yen to not only fund the buyback but also to repay existing debt.

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