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Toshiba's activist investor wants IPO, not sale of chip unit

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Toshiba's activist investor wants IPO, not sale of chip unit

Hong Kong-based activist investor Argyle Street Management Ltd. told Japanese conglomerate Toshiba Corp. that the US$18 billion sale of its chip unit to a Bain Capital LP-led consortium is no longer necessary after closing its recent ¥600-billion share sale, Reuters reported, citing a letter sent to Toshiba's board.

Argyle, in the letter, said that "there no longer is any urgency to undertake a sale of Toshiba Memory," as it requested a meeting with Toshiba's board in December 2017 or January 2018.

The activist investor also believes that the US$18 billion price tag "significantly undervalues the business," and is proposing an initial public offering for Toshiba Memory instead.

Argyle, a hedge fund with US$1.2 billion under management, sent the letter to Toshiba's board on Dec. 11, Kin Chan, Argyle's chief investment officer, told Reuters, without disclosing the amount of Toshiba shares the fund owns.

The Hong Kong-headquartered hedge fund is reportedly the first activist shareholder to openly express its opposition to the proposed sale and is now inviting the more than 30 overseas investors who participated in the recent share issue to join Argyle and team up on the matter.

Argyle is now in talks with at least three funds who share the same opinion, according to Chan.

In September, Toshiba agreed to sell its prized memory chip unit Toshiba Memory Corp. to a consortium led by U.S. private equity firm Bain Capital in an effort to cover liabilities amounting to billions of dollars from its bankrupt nuclear power unit Westinghouse Electric Co. LLC.

The Japanese conglomerate, in November, decided to sell new shares and raise ¥600 billion to preserve its listing status with the Tokyo Stock Exchange, along with an announcement that it will sell Westinghouse Electric to a "third party."