Silver Lake & Broadcom Offer $17.9Bn for Toshiba's Chip Unit

Silver Lake & Broadcom Offer $17.9Bn for Toshiba's Chip Unit

Private-equity firm Silver Lake Partners and American chipmaker Broadcom have reportedly tendered a $17.9 billion offer for Toshiba’s NAND flash memory unit. The Japanese company is eager to finalise the sale before a shareholder’s meeting in June, according to a report from the Nikkei Asian Review.

It had previously been reported that up to ten companies were interested in buying a stake, including South Korean chipmaker SK Hynix, Micron Technology, Western Digital and several private equity firms. Toshiba is prepared to offload a majority stake or even its entire stake in the chip unit, which makes memory chips for mobile devices.

The news follows a turbulent few days for the 142-year-old conglomerate. Toshiba shareholders yesterday agreed to split off the company’s chip unit, their most valuable business, to save the group from the impact of a $6.3-billion write-down at its US nuclear business. The meeting lasted over three hours, with investors taking the opportunity to pose questions about Toshiba’s management.

“There is a chronic culture of lying. We can’t possibly trust such a company. Shame on you,” one angry shareholder said in the meeting, which was shown to reporters through a video feed.

"Toshiba is now a laughing-stock to the whole world," another shareholder said during a Q&A section. "I think all of you are incompetent as managers. Do you even know what's happening?"

Satoshi Tsunakawa, Toshiba’s Chief Executive, told angry shareholders that the company had no other choice but to make the sale. He promised that the company would do its best to avoid the delisting of its shares after it failed twice to release audited accounts for the third quarter of 2016.

Shareholders remain skeptical. It was only seven months ago that Toshiba promised investors it would rebound from its $1.3bn accounting scandal in 2015 by focusing on its nuclear and flash memory businesses. Fast forward to 2017 and the company has revealed a $6.3bn writedown on its US nuclear business and plans to sell its NAND chip business.

The Tokyo-based company’s estimated loss from its nuclear business in the United States stands at around ¥700 billion, while its capital was only ¥360 billion at the end of September 2016.

What does this mean for the company and its shares? If Toshiba's deficits exceed its assets at the end of this month, which is the end of its business year, then the company’s shares would be moved from the TSE's First Section to the Second Section. Even more worryingly, if Toshiba fails to rectify the situation within the next year, it shares would risk getting delisted.

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Published by Research and Markets