Toshiba Corp is considering the sale of a majority stake in its Westinghouse nuclear unit as the company grapples with construction delays and a multibillion dollar writedown in the business.
The Tokyo-based company is re-evaluating Westinghouse’s position within the group and it might deconsolidate the nuclear unit by selling a controlling equity stake.
Toshiba made the announcement as it gained approval to delay the release of third-quarter earnings until April 11.
Shares reversed losses of as much as 8.8 percent and gained 0.5 percent at the close in Tokyo yesterday.
Westinghouse has been at the center of Toshiba’s most recent problems amid cost overruns on nuclear projects and related litigation. While the company was due to report final figures yesterday, it said it needed more time to examine reports of “inappropriate pressure” internally to push through the acquisition of a US construction firm specializing in building atomic plants.
Toshiba has estimated it will need to take a writedown of ¥712.5 billion (US$6.2 billion), but it has not been able to get its auditors to sign off on the earnings results.
“The shares are up because the company has come out and shown its willingness to make strategic decisions about Westinghouse,” said Hideki Yasuda, an analyst at Ace Research Institute. “The uncertainty over the extent of losses in the nuclear business has been the No. 1 source of worry. Sloughing it off would bring stability and a higher valuation for Toshiba.”
Toshiba said it is planning to sell about ¥160 billion of assets in the 2016 fiscal year.
It also plans to cut the number of board members and have a majority of directors from outside the company.
Westinghouse appears to be already assembling a team of lawyers and advisers to help with the restructuring.
The company has hired PJT Partners Inc, people with knowledge of the matter have said.
Lisa Donahue of AP Services LLC, an affiliate of AlixPartners, is to lead the Pittsburgh, Pennsylvania-based company’s operational restructuring efforts, a Westinghouse spokeswoman said.
It also brought in bankruptcy attorneys from Weil Gotshal & Manges LLP, Reuters reported earlier.
If Toshiba does part ways with its US nuclear unit, the likely buyer might be a regional neighbor with global ambitions.
Westinghouse would be a strategic fit in China or South Korea, which are developing their own reactors for export, analysts and academics have said.
The region is also home to about half the world’s nuclear units under construction, while China is forecast to have the largest fleet of reactors by the middle of next decade.
A sale of Westinghouse to state-run Chinese companies might run into national security concerns or political challenges in the US and Japan, said George Borovas, the global head of the nuclear group at Shearman & Sterling LLP, a New York-based multinational law firm.
That could leave South Korea as an easier fit.
Korea Electric Power Corp would consider a purchase if it receives a proposal from Toshiba, a company spokesman said.
The uncertainty over the valuation of Westinghouse has held up auditor’s approval for Toshiba’s third-quarter earnings. Toshiba has until April 11 get auditors to sign off on its books, but it can request another extension.
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