TOKYO -- Toshiba's plan to spin off and sell part of its chip business has run up against potential buyers' lack of interest in the small stake on offer, leaving the company scrambling to find other options to offset its massive loss this fiscal year.
The Japanese electronics maker has received investment proposals from about five parties, down from the 10 or so that had initially indicated interest. Chipmaking partner Western Digital, chipmaker Micron Technology and private-equity firm Bain Capital -- all of the U.S. -- are among those throwing their hats in the ring.
Potential Chinese investors such as Tsinghua Unigroup apparently did not bite. Though Hon Hai Precision Industry of Taiwan, better known as Foxconn, had expressed interest, whether it submitted a proposal is unclear. Canon and Tokyo Electron took a pass, noting that a capital tie-up with Toshiba would make it tougher to do business with other chipmakers.
The proposal deadline probably fell around Friday. Toshiba will review the submissions and narrow down its options this week.
The company is offering just 19.9% of voting rights in the new entity, which investment funds complain is too little to allow direct involvement in management. Investment by nonfinancial companies would require time-consuming antitrust scrutiny, eliminating it as a realistic option, a top Toshiba official said. Whether the share sale will work out remains in doubt.
Toshiba is set to book an impairment charge of up to 700 billion yen ($6.24 billion) related to U.S. nuclear operations for the fiscal year ending in March. The details will be released with earnings for the nine months through December, due out Feb. 14. The loss could wipe out Toshiba's shareholders' equity -- which totaled roughly 360 billion yen at the end of September -- leaving the company with negative net worth.
Other steps are being considered to raise money and avoid this outcome, including a capital increase by Toshiba itself. A proposal involving an offering of preferred stock has already been sent to funds. Toshiba is reportedly also weighing selling shares of Toshiba Tec, whose products include point-of-sale systems.
But the money-losing nuclear business itself makes Toshiba a risky investment. And the company has few options for asset sales that would sufficiently reinforce its capital cushion, a senior Toshiba executive said.
Toshiba will get the ball rolling on fundraising in mid-February, once the size of the loss has been determined, an insider said. The company has less than two months left to avoid ending up with more debt than assets at fiscal year-end.