Originally the board of Toshiba wanted to sell just 19.9% of the semiconductor making business, which was expected to raise $2bn, maybe more. In hanging on to the majority of the business Toshiba would be able to maintain control over the business from which 80% of operating profit is derived. Yet the banks saw the matter differently. Whilst the sale of the majority of the business solves many problems, it creates a fresh set. The more the ‘crown jewels’ of Toshiba are sold off, the harder making a profit becomes.
Traditionally Japanese banks are very sympathetic to local conglomerates, which is good news for Toshiba. But the good faith will not last forever – not even in Japan. Selling the semiconductor making arm of the business will keep the banks onside, at least for the time being. Pending court cases could cost the conglomerate vast sums of money; the sale provides a buffer against those.
The huge write-down came from the nuclear section of the Toshiba empire. Having invested billions of dollars into manufacturing nuclear power plants, Toshiba is no longer constructing new projects. Cutting losses is the best course of action. Selling the entirety of Westinghouse (the nuclear business) is generally believed to be almost impossible, especially given the policies of many governments towards nuclear power since the Fukushima disaster. Some parts of Westinghouse will be sold, but nobody knows how much of the initial investment can be recouped. Withdrawing entirely is the only sensible, if painful, course of action available to Toshiba.