As meeting March deadline unlikely, Toshiba to have more options on chip deal

After China said it was still reviewing a proposed $18 billion acquisition by a Bain Capital-led consortium, Toshiba Corp (T:6502) looks set to have more options for its chip unit, making it highly unlikely that an imminent deadline for the deal will be met.

“China is reviewing the deal, without elaborating further”, China’s commerce ministry said on Tuesday in a brief statement.

A source with direct knowledge of the matter has said, for the deal to close by its agreed deadline of March 31, antitrust approval from China must come by early this week, as administrative procedures and the transfer of money still need time to be completed.

Failure to meet the deadline gives Toshiba the option of walking away from the sale of the world’s No. 2 producer of NAND chips without penalty – a move that some investors have urged it to consider.
“The firm had not yet given up on closing the deal by the end of the month and even if the deadline passed, it would still aim to sell the chip unit as soon as possible”, said a spokesman for Toshiba.

A long and highly contentious battle for the prized unit was won by the Bain consortium won, which Toshiba put up for sale after billions of dollars in cost overruns at its Westinghouse nuclear unit plunged the Japanese conglomerate into crisis.

The conglomerate no longer needs the funds as much, having raised $5.4 billion from a share issue to foreign investors late last year, while the sale of the chip unit was once thought necessary to rescue Toshiba from insolvency and a delisting.

“Toshiba’s board should consider an IPO instead”, has argued Hong Kong-based activist investor, Argyle Street Management Ltd, a hedge fund with $1.2 billion under management. It says it has other investors on its side.

Under the deal with Bain, Toshiba would retake 40 percent of the unit, which has seen earnings surge on booming demand for semiconductors.

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