Toshiba recently secured shareholder approval for the sale its memory chip unit, Toshiba’s earnings report for the past business year, and the appointment of new board members. The conglomerate is now working against the clock as Toshiba needs its chip unit deal to close by the end of this coming March, or else likely report a negative net worth, in which liabilities exceed assets, for a second year in a row; triggering an automatic delisting from the Tokyo Stock Exchange. Toshiba fell into negative shareholder equity following a multi-billion dollar write down on its now bankrupt US nuclear subsidiary Westinghouse.
The company separated out the unit in April as a prelude to the sale, and has said it was being taxed on the basis of assets and liabilities of the transferred business at the time of the split. Due to the tax impact, Toshiba says it expects a loss of roughly $970 million end of year instead of its previously forecasted profit of about $2 billion.
Toshiba has said it is considering various alternatives should the $18 billion sale of its chip unit fail to close by the end of the financial year; leaving the company short of funds needed to ensure it will stay listed. The money received from the sale will be crucial to cover billions of dollars in liabilities stemming from the company’s now bankrupt US nuclear unit Westinghouse. However, because the sale was only recently approved it is unlikely that it will receive the necessary regulatory approvals by the end of March as these reviews typically take at least six months. Shareholder equity will turn positive should the chip unit sale be completed successfully.
“Nothing has been decided, but it’s true that we are considering potential measures,” CEO Satoshi Tsunakawa told shareholders.
The CEO failed to further elaborate on potential measures Toshiba may take, but his comments follow the Tokyo Stock Exchange’s decision to remove the company from a special watchlist that had prevented Toshiba from issuing new shares within the market. Tsunakawa said his company is currently talking with regulators, making an all-out effort to gain their approval
The sale of the chip unit, which is the world’s number 2 producer of NAND semiconductors, also faces legal challenges from Toshiba’s joint venture partner Western Digital; who has sought an injunction with the International Court of Arbitration bringing further obstacles to completing the sale. It has been speculated that should Western Digital gain an injunction order, it could harm banks willingness to provide Toshiba with any further financial support. On Tuesday Toshiba said in a statement that it “remains fully determined to resolving the issue through the arbitration process.”
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