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Toshiba to offload memory chip unit to buffer market volatility

Sale of Kioxia shares set for after unit's October IPO

Toshiba is focusing its operations on the stable infrastructure business.   © Reuters

TOKYO -- Japanese technology group Toshiba will gradually unwind its stake in memory chip unit Kioxia Holdings, Nikkei learned Friday, in a bid to distance group earnings from the volatile semiconductor industry.

Kioxia, the spinoff formerly named Toshiba Memory, plans to list on the Tokyo Stock Exchange by October. Toshiba will sell its 40.2% holding after the float.

More than half the after-tax proceeds from the sales will be returned to shareholders.

Kioxia is the world's second-biggest producer of NAND flash memory, which is used in a range of products from smartphones to self-driving cars, after Samsung Electronics. Toshiba spun off its memory unit in 2018 following a ruinous accounting scandal and financial troubles at former U.S. nuclear subsidiary Westinghouse Electric.

Toshiba sold the memory unit for roughly 2 trillion yen ($18.7 billion) to an international group of investors that included U.S. buyout firm Bain Capital. Toshiba later spent about 350 billion yen to purchase the 40.2% stake.

Details of the sale, such as the number of shares, will be determined later. Kioxia plans to list on the first section of the Tokyo exchange in October pending approval by the bourse in August.

Kioxia's market value is expected to be in the trillions of yen, which would generate a large return for Toshiba.

Toshiba is focusing operations around infrastructure services in a quest to create a stable earnings structure resilient to economic swings. The offloading of Kioxia shares appears to be part of this push.

The semiconductor industry is characterized by wide swings in earnings. As an equity-method affiliate, Kioxia's fortunes has an effect on Toshiba's earnings.

Toshiba greatly improved its group operating profit for the year ended March, but the company still turned in a net loss. Part of the blame fell on Kioxia's red ink for the period.

Investors have called upon Toshiba stabilize earnings by selling off its holdings in Kioxia.

The group restructured and raised new capital, and about 70% of Toshiba is now owned by non-Japanese investors. President and CEO Nobuaki Kurumatani, an executive with a background in finance, has worked to boost shareholder returns, such as greenlighting a share buyback approximating 700 billion yen. Most of the after-tax proceeds from the Kioxia sale will be also be directed toward shareholder rewards.

Meanwhile, Toshiba announced Friday that Yoshimitsu Kobayashi will resign as board chairman. The company is moving to appoint Osamu Nagayama, honorary chairman at Chugai Pharmaceutical, as the replacement.

At the beginning of this year, Toshiba announced accounting irregularities at subsidiary Toshiba IT-Services, indicating that the scandal-prone group has not fully regained its footing. Critics have pointed out the lack of a visible growth strategy.

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