In Uncategorized

Fans of 70’s & 80’s soap operas Dallas & Dynasty switched on to savour the conflict between the Ewing & Barnes families & watch Alexis (aka a smouldering Joan Collins) run rings round the Carringtons.

Such is the cut & thrust of the plot & diverse list of characters, recent goings on at Toshiba similarly deserve their spot on prime time TV.

The story to date tells of a sprawling Japanese corporation that overexpanded & came unstuck, specifically via its $5.4bn purchase of nuclear power plant business Westinghouse in March 2006.

Fast forward to March 2017 & huge cost overruns at 2 US projects forced Westinghouse to file for bankruptcy & Toshiba to look for ways to shore up its balance sheet &, ultimately, survive.

The plan that emerged came in 3 parts:

  1. Raise new capital (completed in Nov 2017 raising Y600bn).
  2. Sell claims against Westinghouse (completed for $2.16bn in Jan 2018).
  3. Sell its global #2 ranked flash memory business (offer of $18bn accepted from Bain Capital, awaiting Chinese approval).

It’s part 3 that is proving increasingly contentious. Initially a legal spat broke out between Toshiba & joint venture partner Western Digital, with the latter trying to block the sale to a consortium which included rival SK Hynix.

Having traded blows in the courts the two companies reached ‘a global settlement agreement to resolve their ongoing disputes in litigation and arbitration, strengthen and extend their relationship, and enhance the mutual commitment to their ongoing flash memory collaboration’ in Dec 2017.

Which leaves Chinese regulators as the last major sticking point. The problem is those same regulators are viewing the proposed Bain (a US private equity company) / Toshiba memory deal through the lens of the blocking of Broadcom’s Qualcomm bid by the US in March, the ban this month on US telecom companies buying communication equipment from foreign companies (with Chinese manufacturers Huawei Technologies & ZTE cited) & a simmering US/China trade war.

Toshiba has also collected a bevy of activist funds on its shareholder roster one of whom (Argyle Street Management) argues the memory business is worth up to twice what Bain is offering.

All of the above is being played out on a stage where investors are unsure whether we are in a semiconductor supercycle (amidst sustainable long term demand from the IoT, data centres & auto, & China’s ambition to build its own IC & FPD industries) or if we are simply close to the top of the cycle (interestingly the Apr 24th purchase of US semiconductor wafer handling robot manufacturer Genmark Automation suggests Nidec is in the former camp).

Those in search of a route through the technology maze in Japan should get in touch.

Meantime how the plot plays out from here remains to be seen but, much like Dallas & Dynasty, it is set to make compelling viewing.