Rumored Western Digital-Toshiba Deal Could Be Accretive To Earnings

BTIG Research has said the speculated deal between Toshiba Corp (USA) (OTC: TOSYY) and Western Digital Corp (NASDAQ: WDC) could be accretive to earnings.

It has been widely reported in the press that Toshiba is considering a spinoff of its semiconductor business and selling a 20 percent stake to Western Digital for $1.8 billion–$2.7 billion to cope with a multi-billion-dollar writedown.

The Speculative Deal

Toshiba has subsequently stated that it is studying the possibility of separating into an independent company. However, nothing has been decided.

“While it’s difficult to speculate beyond the headlines, we think it’s possible that a deal could be accretive to earnings,” BTIG wrote in a note.

Toshiba, which is recovering from a $1.3 billion accounting scandal two years ago, stunned the market with its disclosure last month that a U.S. nuclear construction unit may result in billions of dollars in losses.

Running out of options, the Japanese conglomerate is rumored to sell a minority stake in its core semiconductor business and considering potential buyers including U.S. partner Western Digital.

ADRs of Toshiba closed Tuesday’s trading at $15.35, while shares of Western Digital ended at $71.62.