Toshiba in Talks to Sell Up to 36% Stake in Westinghouse

Toshiba Corp. (6502), the Japanese builder of nuclear reactors, is in talks to sell as much as 36 percent of its Westinghouse Electric atomic-power unit as industry growth slows after last year’s meltdowns in Fukushima.

The company is in discussions with three parties for a possible sale of as much as 16 percent in the business, and is talking with three other parties about selling a 20 percent stake, President Norio Sasaki said in an interview today. One of the parties in the latter discussions is Chicago Bridge & Iron Co. (CBI), he said.

Toshiba said in October it had interest from potential partners for the nuclear business and was open to talks on selling stakes as long as it retained majority control. A sale would allow it to offload shares after being forced to buy 20 percent of Westinghouse as Shaw Group Inc. (SHAW) exercises an option to sell its stock. It also would reduce Toshiba’s exposure to the nuclear industry following Japan’s power-plant shutdowns and global growth in alternative energies.

“It’s good for Toshiba, as it can make effective use of cash from the sale,” said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan Co., a Tokyo-based hedge fund advisory firm. “The company can still do what it wants to do with Westinghouse as it will still hold a majority stake.”

Photographer: Noriyuki Aida/Bloomberg

Toshiba Corp. President and Chief Executive Officer Norio Sasaki. Close

Toshiba Corp. President and Chief Executive Officer Norio Sasaki.

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Photographer: Noriyuki Aida/Bloomberg

Toshiba Corp. President and Chief Executive Officer Norio Sasaki.

Potential Buyers

Most of the offers for the 20 percent stake have come from U.S. companies, while Toshiba has received interest from “all over the world” for the 16 percent stake, Sasaki said.

“We’d like the buyer of Shaw’s 20 percent to be an American company,” Sasaki said. “For the other 16 percent, it doesn’t have to be American as long as we get synergies and U.S. regulators approve it.”

Toshiba, which also makes consumer electronics and home appliances, rose 5 percent, the most since Sept. 7, to 337 yen in Tokyo trading. Japan’s benchmark Nikkei 225 Stock Average added 0.7 percent. The stock advanced 7 percent this year.

“By selling a stake, we can get a partner to help us boost profitability,” Sasaki said.

Toshiba paid $4.16 billion for 77 percent of the nuclear- power services provider in 2006. It now owns 67 percent after selling a portion to Kazakhstan’s Kazatomprom in 2007.

Boosting Stake

The Japanese company is set to acquire 20 percent of Westinghouse from Baton Rouge, Louisiana-based Shaw Group next month for 125 billion yen, bringing its total holding to 87 percent.

“It has been Toshiba’s idea to keep a 51 percent share and let others hold the rest,” Hideki Yasuda, an analyst at Ace Securities Co., said by phone yesterday. “It is good if the company can bring that to reality.”

Chicago Bridge & Iron, based in The Hague, agreed in July to buy Shaw Group for about $3 billion to expand its nuclear business. Shaw and CB&I are part of the group constructing the first new reactors in the U.S. since the Three Mile Island nuclear disaster in 1979.

Japan Prime Minister Shinzo Abe, whose party regained power after a Dec. 16 election, indicated he may allow utilities to build nuclear-power plants if they meet safety standards to be set by the Nuclear Regulation Authority, the Tokyo Shimbun newspaper said Dec. 1, citing an interview with Abe.

Former Prime Minister Yoshihiko Noda in September approved a policy calling for banning the construction of new plants.

China, Czech Republic

“We want the new government to create an environment where we can project a growth picture,” Sasaki said. “The energy policy should be part of the country’s growth strategy, and nuclear power should be one of the options.”

Sasaki said Westinghouse’s business will benefit from demand in China and the Czech Republic.

“Demand for nuclear power plants is coming from emerging countries where power supply is short, and not all of them are prone to earthquakes,” Myojo’s Kikuchi said.

Toshiba, the biggest maker of NAND flash memory after South Korea’s Samsung Electronics Co., cut its full-year earnings forecasts in October amid weaker sales of semiconductors and as a stronger yen eroded overseas earnings. The company was also hurt by slumping demand for televisions, forcing it to end domestic production last fiscal year.

“We’re working to make our TV operation profitable” in the three months ending in March, Sasaki said. “We’re at the last stage of clearing inventories, including parts, so our TV business has been improving.”

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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