TOKYO -- Toshiba's board of directors decided to raise some 600 billion yen ($5.35 billion) in capital, the Japanese electronics maker said Sunday, in a move to ensure that the company remains listed if plans to sell its memory chip unit do not proceed as expected.
Tokyo Stock Exchange rules require delisting a company whose net worth is negative for two consecutive years. Toshiba would use the funds to cover liabilities, having been put on the hook tied to its U.S. nuclear power business.
Toshiba aims to raise the capital from some 60 overseas investors including New York's King Street Capital Management and Singapore-based Effissimo Capital Management, which was founded by former associates of activist investor Yoshiaki Murakami.
Each share will be priced at 262.80 yen, about 10% below Friday's closing price. The deal would raise Effissimo's stake from almost 10% to just over 11%, maintaining it as the top shareholder. Payments for shares are expected Dec. 5.
Toshiba's net worth is on track to stand at minus 750 billion yen when the company's fiscal year ends March 31, 2018. By using the fresh capital to pay down liabilities, however, the company will be able to take a tax-recognized loss. The lighter tax burden for Toshiba is expected to lift net profit by at least around 240 billion yen, allowing Toshiba to push its net worth into positive territory even if the conglomerate is unable to sell its Toshiba Memory unit by then.
The new capital would be equivalent to about half of Toshiba's current market capitalization. Though concerns exist about diluting the value of existing shares, the deal would wipe away fears of a delisting and put the company on sound financial footing.
The eventual sale of the flash memory unit, expected to provide more than 1 trillion yen in profit, would raise Toshiba's capital to around 1.1 trillion yen. With a capital ratio topping 20%, the company would put its financial woes behind it, helping Toshiba pursue its restructuring plan centered on the infrastructure and information technology businesses.
Toshiba struck a deal for the memory unit with a group of companies from Japan, the U.S. and South Korea at the end of September, but the reviews by competition watchdogs in a number of countries may not progress quickly enough to complete the sale until after March 31.