Toshiba's plan to raise about $5.4bn through a sale of new shares will help it avoid a delisting, but will also mean more than 30 overseas investors, including activist funds, will own 35% of the embattled conglomerate.
A board meeting on Sunday decided on the move, it said.
Toshiba's flash memory unit may not be sold in time to bring in the necessary capital, because it needs to clear competition laws in different countries. Toshiba's shares, however, ended down just 5 percent at 275 yen as the risk of a delisting has largely been removed and as the capital raising had been expected. - As the parent company of Westinghouse, which has filed for Chapter 11 bankruptcy protection in the United States, Toshiba owes the owners of two USA nuclear projects $5.9 billion.
But regulatory reviews and a challenge from US data storage firm Western Digital could delay the sale beyond the critical March deadline. Now, the tradeoff is that a total of about 60 funds, including Effissimo Capital Management Pte, will now become shareholders controlling a bigger stake in Toshiba.
The financial difficulties caused by Westinghouse Electric led Toshiba to successively delay the presentation of its financial results, leading the group to be demoted to the second tier of the Tokyo Stock Exchange (TSE) in August. Payments for shares are expected December 5. Another risk to the chip division sale is a spat between Toshiba and business partner Western Digital Corp., which has argued it should have veto rights in any sale due to their joint ventures and tried to buy the unit itself.
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Toshiba's net worth is on track to stand at minus 750 billion yen when the company's fiscal year ends March 31, 2018. The deal would raise Effissimo's stake from nearly 10% to just over 11%, maintaining it as the top shareholder.
The ailing Japanese group is raising $5.3 bln, or almost half its market value again, by selling new stock.
Selling its holding in the nuclear-power business Westinghouse, and any liability for claims, will let Toshiba "significantly reduce" resources required to rehabilitate that unit, funds that can be focused on new businesses, the company said in the statement Sunday.
Private equity firms Blackstone Group and Apollo Global Management have teamed up to bid for the business, while Cerberus Capital Management was in talks with U.S. nuclear power plant component provider BWX Technologies about submitting a joint bid, the sources said at the time.
The company said it would use proceeds from the share sale to pay off liabilities related to the bankrupt unit and book losses that will allow tax write-offs sufficient to boost its assets back above liabilities.