Hong Kong Investor Tells Toshiba Sale of Memory Business Not Necessary

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Signage for Toshiba Corporation is displayed atop the company’s headquarters in Tokyo, Japan

Financially strapped Toshiba Corporation of Japan may have received an early Christmas present of sorts, as Reuters reports that a Hong Kong-based activist investor in Toshiba Corporation has told Toshiba that the proposed sale of its $18 billion sale of its memory-chip unit to a Bain Capital-led group “is no longer necessary after its recent capital injection, according to a letter seen by Reuters.”

The news comes on the heels of last week’s news that Toshiba’s partner in the memory business, Western Digital, will likely end its opposition to the sale.

The Hong Kong investor, hedge-fund Argyle Street Management, is said to have sent the letter to Toshiba’s board, Chief Investment Officer Kin Chan told Reuters.

Reuters also reports that Argyle Street Management is asking some 30 investors who participated in Toshiba’s recent 600 billion yen ($5.3 billion) new share issue “to team up.”

Toshiba announced in September 2017 that it would be selling its Toshiba Memory Corporation, the world’s number-two producer of NAND memory chips,  to the Bain consortium to cover billions of dollars in liabilities incurred by its now bankrupt U.S. nuclear-power unit Westinghouse.

According to Reuters, in order to ensure that it remains listed on the Tokyo Stock Exchange, Toshiba also secured a $5.3 billion cash injection from overseas funds this month, which, along with tax write-offs, is said to provide it with sufficient funds to cover its liabilities.

Argyle believes that “there no longer is any urgency to undertake a sale of Toshiba Memory,” it said in the letter, which proposed a meeting with Toshiba’s board in either December or January.

The $18 billion price tag for the chip unit “significantly undervalues the business,” the letter said, adding that the board should consider instead an IPO (initial public offering) for Toshiba Memory Corporation.

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