Struggling conglomerate Toshiba Corp. achieved a major financial goal Tuesday as it completed a ¥600 billion ($5.3 billion) third-party allocation of new shares to 60 overseas investment funds, removing its risk of delisting from the Tokyo Stock Exchange.
Following the deal, Toshiba will avoid falling into negative net worth for a second consecutive year — a scenario that would trigger an automatic delisting — even if it fails to finalize the sale of its chip business by next March.
The 60 funds include Effissimo Capital Management, established by a former employee of activist investor Yoshiaki Murakami’s fund, and Third Point LLC. Effissimo, which was already Toshiba’s biggest shareholder with a 9.89 percent stake, saw its tranche further increase to 11.34 percent with the new share issuance.
Toshiba will use the acquired funds to pay off massive liabilities stemming from its now-bankrupt U.S. subsidiary Westinghouse Electric Co. and sell off related debts.
Following the transactions, Toshiba is expecting its shareholders equity to improve by at least ¥240 billion and to eliminate its negative net worth, anticipated to have stood at some ¥750 billion at the end of March.
In September, Toshiba agreed on the ¥2 trillion sale of chip unit Toshiba Memory Corp. to a Japan-U.S.-South Korea consortium led by private equity firm Bain Capital.
Last month, however, the Japanese company’s board members approved a contingency plan to raise ¥600 billion in new share sales, in case the deal is not completed by the end of March, due to legal challenges posed by U.S. joint venture partner Western Digital Corp.
Western Digital has taken Toshiba to court in a bid to block the sale of Toshiba Memory, claiming that selling the chip unit without its consent breaches their joint venture contract.
Toshiba and Western Digital have entered final talks to reach a settlement over the sale and are set to present the key details at the companies’ board meetings soon, according to industry sources.