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Toshiba CEO Satoshi Tsunakawa bows during a news conference at the company's headquarters in Tokyo on Jan. 27.   © Reuters
Business

Potential IPO for Toshiba chip business

Company also says nuclear power will no longer be a core business

TOKYO -- Toshiba will consider the possibility of an initial public offering for its semiconductor business in the future, the company said on Friday.

The Japanese conglomerate, which is looking for measures to save itself from falling into negative net worth in the current fiscal year due to a heavy write-down in its U.S. nuclear business, decided to spin off its valuable memory chip business in a board meeting on Friday.

It will also look to sell a stake of less than 20% to outside investors to offset the large write-down. The Nikkei has learned that Toshiba's plan is to sell off 19.9%.

Looking into the future of the chip business after it is spun off, Senior Vice President Yasuo Naruke said at a press conference at company headquarters that taking it public could be an option. "We have not decided the details, but we believe an IPO is one of the future possibilities," he said.

Toshiba's current struggles stem from U.S. subsidiary Westinghouse Electric's purchase in December 2015 of Chicago Bridge & Iron's nuclear power services business. Last month, Toshiba said that it could book an impairment loss of several billion dollars, with plant project delays leading to cost overruns. The Nikkei understands that the impairment loss could reach 700 billion yen ($6.08 billion).

Toshiba could receive 200 billion yen from the sale of its core chip business, according to sources, which will partially offset the substantial write-down. Toshiba said the company will finalize the impairment loss by Feb. 14, when it reports the group's third-quarter results.

CEO Satoshi Tsunakawa said the board's decision to spin off the chip business was unanimous. "Toshiba's revival has taken a step back, but [with the spinoff of the company] we will take this chance to move forward," Tsunakawa said. "Of utmost importance for us is to start strengthening our financial foundation."

The Tokyo-based industrial conglomerate will hold an extraordinary shareholders meeting toward the end of March to seek approval for the spinoff plan, and hopes to strike a deal by March 31, the end of the current fiscal year.

Potential investors in Toshiba's memory chip business include hard-drive maker Western Digital, which partners with Toshiba on memory chips and has already submitted an investment proposal.

South Korea's SK Hynix, a Toshiba partner in memory chips, could also emerge as an investor. So too could American chipmaker Micron Technology.

Toshiba, though, is reluctant to sell to memory chip competitors because of antitrust issues and other concerns.

At the press conference, Tsunakawa also said the company will no longer position nuclear power as its core business.

Tsunakawa said the company "will review" the overseas nuclear business, which includes the highly risky construction of new plants. As for Japan's nuclear power business, he said it will center around maintenance and decommissioning of nuclear plants, for which the company expects stable earnings.

To strengthen risk management, the company's nuclear business will become an independent body that will be placed directly under the CEO. "This will enable smoother communication, speed up decision-making ... and allow strict cost management," Tsunakawa said.

Regarding a potential resignation, Tsunakawa said he will leave that decision to the nominating committee.

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