Toshiba to raise $5.3 billion from new shares to avoid delisting risk

Toshiba Corp is seen as window cleaners work on the company's headquarters in Tokyo Japan

Toshiba Corp. has said it will issue more than 2 billion new shares for third-party allotment on December 5 to raise ¥600 billion in fresh capital, an effort to keep its shares listed.

Toshiba's board decided it will issue 2.28 billion new shares to raise a total of ¥600 billion ($5.3 billion), with financing expected to close on December 5.

The move, decided at a board meeting on Sunday, will allow Toshiba to pay off billions of dollars in liabilities at its bankrupt USA nuclear power business, Westinghouse.

The struggling company agreed to sell its prized memory chip business in September, to a consortium led by private equity firm Bain Capital and backed financially by Apple, Dell and other US and Japanese firms.

And if the sale manages to survive legal challenges and goes ahead, Toshiba will still own 40 percent in the semiconductor unit as it plans to reinvest.

Two things could help after March for Toshiba; it will have a business with a stake of 40% in Toshiba Memory and large amounts of cash on hand; or a company that continues owning a very good business, said one investor who took part in the issue of shares, but did not give his or his company's name.

Each will be priced at ¥262.8, a 10 percent discount from Friday's closing price.

The move will create a huge dilution of 54% in earnings per share.

The number of new shares is roughly half the number of now listed shares.

The share sale, together with the tax write-offs, will boost its balance sheet by at least 840 billion yen in total, the company said.

Toshiba aims to raise the capital from some 60 overseas investors including New York's King Street Capital Management and Singapore-based Effissimo Capital Management, which was founded by former associates of activist investor Yoshiaki Murakami.

Sources told Reuters in September that Westinghouse is working with investment bank PJT Partners Inc PJT.N on a sale process. More important, Western Digital, Toshiba's partner in the chip joint venture, is seeking to block the deal, insisting on its right to veto any transaction.

Toshiba is demanding that Western Digital drop the litigation as a condition over a coming round of a joint investment in Toshiba's new flash-memory chip production line in Yokkaichi, Japan.

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