Japanese group, Toshiba Corp (6502.T) has unveiled plans to sell a minority stake in its core semiconductor business.
According to a source privy to the plan, the group is considering potential buyers including U.S. partner Western Digital Corp (WDC.O) as it prepares for a multi-billion-dollar writedown.
The laptops-to-engineering conglomerate, still recovering from a $1.3 billion accounting scandal two years ago, shocked investors in December by announcing major cost overruns at a U.S. nuclear business it bought in 2015. That could now mean a charge against profit topping $4 billion.
The exact scale of that number is due to be made final next month, Toshiba said. Toshiba, still on the Tokyo Stock Exchange watchlist after the 2015 scandal, does not have many options to offset the impact of a writedown of that size, which could wipe out shareholder equity.
Analysts and investors have expected a spin-off and a part-sale of the profitable chips business to be part of any solution, potentially along with other, smaller asset sales.
“It is true that we are discussing a spin-off of our memory chips business, but nothing has been decided,” Toshiba said in a statement on Wednesday, after the Nikkei business daily reported the firm was considering such a move.
The chips unit generates most of the Japanese firm’s operating profit.
While Toshiba did not confirm whether it was looking to sell around 20 percent in the unit to Western Digital at a price in a range of $1.76 billion to $2.7 billion, as Nikkei reported, a source briefed on the matter said Toshiba and Western Digital were in talks for a “minority stake” sale.
Industry sources told Reuters that Toshiba could also ask funds to invest in the chips business, a unit that sources have said could be valued at more than 1 trillion yen ($8.9 billion). One analyst at a foreign investment group estimated on Wednesday a valuation of 2 trillion for the unit.