Japan’s Toshiba to sell down Kioxia stake, return much of proceeds to shareholders

Japan’s Toshiba Corp said on Monday it planned to sell down its 40.2 percent stake in flash memory chips firm Kioxia Holdings and will return a majority of the net proceeds to shareholders.

Shares in Toshiba jumped on the news and were up 5 percent in Monday afternoon trade.

It did not disclose details of the planned sale in its statement but sources familiar with the matter said on Saturday it wants to gradually unwind the stake, a process that would begin when the world’s second-largest flash memory chip firm lists its shares later this year.

Japanese media have said Kioxia could be valued at some $32 billion when it lists. Toshiba sold the former flash memory chips unit to a consortium led by U.S. private equity firm Bain Capital for $18 billion in 2018 and bought the 40.2 percent stake as part of the deal.

Toshiba also said it has received two separate proposals for new board directors, both of which it opposes.

One from Effissimo Capital Management, its top shareholder with a 15 percent stake, calls for Toshiba to elect an Effissimo co-founder and two others as outside directors.

Effissimo, a Singapore-based fund established by former colleagues of activist investor Yoshiaki Murakami, cited fictitious cyclical transactions Toshiba revealed this year as an indication that Toshiba’s governance has not significantly progressed since a major accounting scandal in 2015.

The other from 3D Opportunity Master Fund seeks the election of two candidates it is nominating.

In response to both proposals, Toshiba said the board it has nominated is comprised of people with deep knowledge of various areas and ensures appropriate diversity.

Toshiba has been under pressure from activist funds since it sold 600 billion yen ($5.6 billion) of stock to dozens of foreign hedge funds during a crisis stemming from the bankruptcy of its U.S. nuclear power unit in 2017. Nearly 70 percent of its shareholders are non-Japanese.