Toshiba May Miss Deadline for Chip Sale and Reap Billions

It’s increasingly likely Toshiba will miss a March deadline for closing the sale of its memory chip business. That could turn out to be $4 billion worth of good news for the Japanese conglomerate, according to Bloomberg.

The company agreed to sell the crown-jewel memory unit to a consortium led by Bain Capital to avoid delisting after billions of dollars of losses in its nuclear energy operations. But China has yet to grant approval for the deal and regulators are unlikely to sign off before the contract’s March 31 deadline.

That could give Toshiba, now on more stable footing, the opportunity to negotiate a better deal than the 2 trillion yen ($18.6 billion) sale price from September, which may undervalue the business by several billion dollars. The chip unit would probably fetch $22 billion to $24 billion in a truly open auction, said another person familiar with the matter.

If the deal doesn’t close by March 31, Toshiba has the right to terminate. While the company was desperate to raise cash last year, it no longer needs the money to avoid delisting and executives now believe the Bain deal is priced well below market. Toshiba spokeswoman Midori Hara said the company is working to meet the March 31 deadline. Bain declined to comment.

Toshiba is on much more stable footing since the deal was negotiated. It is boosting capital with a 410 billion yen nuclear asset sale and a 600 billion yen new share issuance in December. At the same time, the memory chip business has become even more valuable: It generated 205 billion yen in operating income in the fiscal first half, about 88 percent of the total.

Toshiba would have at least three options if the current deal falls apart. It could negotiate a higher price with the Bain group. It could take the memory chip business public, raising capital and increasing its visibility. Or it could hold onto the business and use its steady profits to fund investments.

Japanese company also announced that it will hire new CEO. Nobuaki Kurumatani, 60, representative director of CVC Capital Partners in Japan and former vice president at Sumitomo Mitsui Banking, will become CEO and chairman, Toshiba said in a statement. Satoshi Tsunakawa will step down as CEO and become chief operating officer. Their roles will be effective from April 1.