Japanese alliance for Toshiba Memory investment taking shape
Businesses, government mull late offer for stake
TOKYO -- A Japanese public-private consortium is being assembled to bid for a stake in Toshiba's newly spun-off memory unit in hopes of heading off potential outflows of technology and talent from the country, it was learned Friday.
Toshiba and members of the business community, with support from the Ministry of Economy, Trade and Industry, are sounding out companies about joint investment in Toshiba Memory. The proposed terms would have each participant contribute about 10 billion yen ($90.2 million).
The government has suggested having the Innovation Network Corp. of Japan and other state-backed funds join the team to put together a total investment package in the 500 billion yen range. This could give the group a large enough stake to serve as a check on major management decisions. "There's room for government-affiliated funds to invest if it'll lead to technological innovation in domestic industry," a senior METI official said.
The group will likely seek to partner with American or other enterprises that participated in the first bidding round, which wrapped up March 29. The roughly 10 bidders are said to consist of U.S., Taiwanese and South Korean companies. The field includes no Japanese companies, some of which have refused to invest in the memory business on the grounds that they could not justify it to shareholders. This line of thinking could make it difficult for the emerging consortium to solicit the participation of other businesses.
Toshiba has indicated it is open to any attractive offers submitted after the first bidding round. A second round will likely begin in May after Toshiba finishes screening the financial condition of bidders. The conglomerate aims to make a final decision before a general shareholders meeting in late June.
But the process of picking a winner will be complicated. Toshiba wants to complete the transaction by the end of March 2018 and ensure that domestic factories and jobs are retained -- demands that will likely reduce how much the company will earn from the sale. Negotiations over terms could drag on for some time.
The nature of the memory business could also put off potential investors. Toshiba Memory is worth an estimated 1.5 trillion yen to 2 trillion yen. Yet the business requires hundreds of billions of yen in annual investment, and the market is highly volatile. Buying into the company for investment purposes is unlikely to yield much in the way of steady returns.