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Toshiba gains shareholder approval for crucial chip unit sale

  • October 24, 2017
  • , Kyodo News , 1:51 p.m.
  • English Press

CHIBA, Japan — Toshiba Corp. secured shareholder approval Tuesday for the sale of its chip unit to a Japanese-U.S.-South Korean consortium, but kept mum about what alternatives to take if it fails to complete the deal before the end-of-March deadline to clear its excessive debt and remain a public company.

 

The struggling Japanese conglomerate also won approval of the lineup of its board of directors at an extraordinary shareholders’ meeting, as well as its earnings results for fiscal 2016, after failing to report the results at its ordinary shareholders’ meeting in June due to its auditor’s refusal to sign off.

 

Toshiba last month picked a group led by U.S. investment fund Bain Capital as its buyer for Toshiba Memory Corp., the world’s second-largest maker of NAND flash memory chips used in smartphones and PCs, after a chaotic, months-long bidding process.

 

Toshiba is rushing to sell the chip business by the end of next March and eliminate its negative net worth, or face involuntary delisting from the Tokyo Stock Exchange.

 

The consortium includes the state-backed Innovation Network Corp. of Japan, the state-owned Development Bank of Japan and chipmaker SK Hynix Inc. of South Korea.

 

“I once again apologize from the bottom of my heart for causing our stakeholders so much trouble and concern,” Toshiba President Satoshi Tsunakawa said at the opening of the shareholders’ meeting. “We will not be able to grow without our shareholders’ trust. We ask for your understanding and support.”

 

But concerns remain as to whether the Japanese conglomerate will be able to complete the sale of its chip business in time, as antitrust screenings in major markets usually take at least six months.

 

Shareholders at the meeting asked what Toshiba plans to do if it is unable to complete the sale of Toshiba Memory by the deadline.

 

“Reports say that it is a fifty-fifty situation with legal issues going on with Western Digital,” a shareholder said in referring to Toshiba’s U.S. business partner Western Digital Corp., which is seeking to block the sale in court on the grounds that it violates their joint venture contract. “It’s going to be a huge problem if you cannot sell the unit.”

 

“I ask you to start thinking about how to avoid risks when the chip unit sale fails,” another shareholder said.

 

Tsunakawa said his company is currently talking with antitrust regulators and making all-out efforts to gain their approval. “What happens if we cannot sell Toshiba Memory is a hypothetical question, but we will need to consider various measures depending on environmental changes. We will continue to focus on selling the unit, avoid delisting and improve our financial standings,” the president said.

 

A shareholder suggested the outflow of human resources from the company following the contested auction is also a blow to Toshiba’s reconstruction. “Even if Toshiba Memory is sold, employees are leaving Toshiba. Improving communications and reforming the company’s work climate will not be enough to revive it,” the shareholder said. Tsunakawa responded that he did not think the current situation is affecting the company’s research and development.

 

Toshiba also gained approval for the reappointment of Tsunakawa and seven other executives to the board of directors while newly appointing two members, including Corporate Senior Executive Vice President Shinichiro Akiba.

 

Akiba’s promotion to the board has been questioned after a report by an external review committee acknowledged his involvement in the company’s accounting fraud revealed in 2015, although he has avoided legal liability.

 

Corporate Senior Executive Vice President Yasuo Naruke, also the president of Toshiba Memory, has resigned from the board following the extraordinary shareholder’s meeting.

 

“I really don’t know what’s going to happen to Toshiba…Decision making was really slow throughout the whole bidding process (involving Toshiba Memory Corp.)…I’m mad but have kind of given up (on Toshiba) at the same time,” a 69-year-old male shareholder from Tokyo said ahead of the shareholders’ meeting.

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