Toshiba, keen to seal $18 billion chips sale, wrestles with last-minute delays

Toshiba is the world’s number two chipmaker and its Toshiba Memory unit accounts for about a quarter of its revenue. (Reuters)
Updated 21 September 2017
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Toshiba, keen to seal $18 billion chips sale, wrestles with last-minute delays

TOKYO: Japan’s Toshiba Corp. is locked in last minute discussions over “key issues” with the would-be buyers of its $18 billion (SR67.5 billion) memory chip business led by US private equity firm Bain, potentially delaying a formal agreement on the sale.
Toshiba said on Wednesday it had agreed to sell the prized unit to the Bain consortium, and had been expected to formalize the sale on Thursday.
Instead, South Korea’s SK Hynix, part of the winning consortium, said talks were still ongoing. Sources familiar with the matter confirmed consortium members were still wrangling over details of their agreement and said commitment letters from all participants were still needed before the sale could be signed formally.
“There are some key issues still to be agreed upon in the content approved by Toshiba’s board,” the South Korean chipmaker said in a statement, adding that it would continue talks.
Toshiba and Bain did not immediately reply to a request for comment.
Adding to uncertainty, jilted suitor and Toshiba joint venture partner Western Digital took fresh legal action overnight, filing new arbitration requests to stop Toshiba investing in a new flash memory production line without its help.
Shares in Toshiba reflected the concerns, falling more than 2 percent in late afternoon trade.
Struggling to plug a yawning balance sheet hole after a cost blowout at its now-bankrupt US nuclear business, Toshiba has been trying to sell its chip business since late January.
Agreeing the sale of the world’s second-largest producer of NAND flash memory chips brings the group closer to the end of a tangled and fraught process.
As late as Tuesday night, sources said Toshiba was leaning toward selling the business to Western Digital.
Bain has partnered with SK Hynix and brought in deep-pocketed US buyers of Toshiba chips such as Apple and Dell to bolster its bid.
But there are major unknowns, including the outcome of antitrust investigations and the battle with Western Digital.
It is unclear how long that process could last, and what impact it would have on the completion of the sale.
Industry watchers also said SK Hynix’s participation could prolong antitrust reviews, particularly in China, as Beijing is trying to grow domestic players. The South Korean chipmaker plans to limit its role to financing, but it’s unclear if it hopes to gain a stake in the future.
“It’s clear to everyone that this Bain deal will have difficulty succeeding,” said Akira Minamikawa, principal analyst at IHS Markit.
The NAND flash memory chips business faces fierce price competition with Samsung Electronics, he said, and China was likely to join the race.
“To survive, Toshiba needs to shift its focus to (flash memory-backed) storage systems for servers rather than selling memory chips alone. And strong players there are Samsung and Western Digital, not (new partner) SK Hynix.”


Egypt stock market plunges as retail investors take flight

Updated 19 September 2018
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Egypt stock market plunges as retail investors take flight

  • Biggest index drop in Egypt since mid-2016
  • Saudi Arabia outperforms in Gulf

LONDON: Egyptian stocks tumbled to their lowest level this year on Wednesday as retail investors took flight.
A sharp rise in Suez Canal revenues, a major foreign exchange earner for the country, was not enough to quell investors concerns about the strength of the currency.
The main Egyptian stock index lost 3.8 percent which some fund managers blamed on generally negative sentiment toward emerging markets worldwide as well as more local speculation about possible currency devaluation.
“Our channel checks suggest the sell-off in the Egyptian market is local retail and institutions driven, on currency fears and speculation over a further round of devaluation,” said Vrajesh Bhandari, portfolio manager at Al Mal in Dubai, Reuters reported.
“Selling is further intensified as margin calls are triggered and technical support levels break down. The country canceled three consecutive Treasury auctions, citing investors’ unrealistic yield demands.”
Egypt’s Suez Canal revenues rose to $502.2 million in August up 6.7 percent from a year earlier according to official data released on Wednesday.
Elsewhere regional stock markets closed mostly lower with the exceptions of Abu Dhabi which edged 0.2 percent higher and Saudi Arabia, the best regional performer, which rose by 1.1 percent.
Saudi stocks are benefiting from the strong oil price which eased slightly yesterday but still hovered just under $79.
OPEC and some other oil producers including Russia will meet in Algeria on Sept. 23 to discuss how to allocate supply increases within their quota framework to offset the loss of oil exports from Iran following the introduction of sanctions by the US.
Those measures will come into force on Nov. 4 and data suggests that buyers are already retreating from Iranian crude purchases.
A key question for the oil price as well as regional stock markets in the weeks ahead will be the extent to which other Gulf oil exporters can compenaste for the loss of Iranian supplies by pumping more.