With Toshiba’s plan to issue $5.4 billion in new shares to overseas investors, the funds generated would be enough to ensure that it avoids a delisting. This deal is being engineered by Goldman Sachs.
Recently burdened by heavy debt (to the billions of dollars) at its recently bankrupt United States nuclear reactor production plant in Westinghouse, the company has sought to break even by the end of the 2017 financial year in March or face the very evident possibility of a delisting. The drawn out auction of its $18bn chip business means that it cannot rely on the funds needed to come through this means on time.
The decision to issue the shares was made at a board meeting earlier and the sale will amount to a 35% stake in the struggling Japanese giant. More than 30 investors will take part in the issue including Cerberus Capital Management, Oasis Management Company and Third Point LLC.
Even if the intended sale of the company’s Memory chip division falls through, the investment will still be a profitable one as Toshiba will still own 40 percent in the semiconductor unit. So, according to an investor participating in the sale, “Either after March you have a company with a 40 percent stake in Toshiba Memory and a lot of cash in hand, or you have a company that continues to own a great business”.
Toshiba’s Big Dilution
The company plans to sell 2.28 billion new shares at 262.8 yen per share, resulting in a huge 54 percent dilution in its earnings per share. However, Toshibas shares have managed to end down just 5% at 275 yen with the risk of delisting seeming further and further distant.
The share deal will see Toshiba accrue $232 million in combined fees to be paid to Goldman Sachs, Lawyers and domestic brokers.
In addition to the issuance of the shares, Toshiba wants to curtail its $6.7bln equity shortfall using tax write-offs it expects to gain from the claims it has against the Westinghouse facility. At the same time, it has also admitted that it is looking to sell its Westinghouse related assets