October 31, 2006 – Toshiba Corp. is mulling a possible management buyout of its wafer subsidiary Toshiba Ceramics Co. Ltd., in a deal worth more than 60 billion yen (around US $518 million). Shares will be tendered to SIC Investment KK, an investment business owned 50/50 by Unison Capital Group and Carlyle Group. In total, 101.445 million shares are to be repurchased at a price of 600 yen/share, a 23.4% premium of the price for the six-month period ending Oct. 30.

Toshiba Ceramics produces a variety of silicon wafers (including annealed wafers) and other materials for semiconductor and LCD processes, as well as advanced ceramics and other applications. However, industry pressure to expand production to include 300mm silicon wafer capacity is creating “a need for extensive and long-term expenditures for R&D and capital investments,” the unit said in a statement. And while strong market growth is projected over the long term for semiconductor and LCD process materials, there are short-term fluctuations caused by demand that “may have a direct impact on the performance of the company in the short term.”

Splitting the unit from its group parent, the largest shareholder with 40.4%, will give it an “autonomous, self-sustainable management structure that will achieve greater management flexibility and promote further business expansion,” and will increase corporate value, according to a Toshiba statement. The takeover deal includes a commitment to provide Toshiba with silicon wafers “in the long term,” and use of the Toshiba name until May 2007.

The electronics giant stated that tendering its stake in the unit (excluding treasury stocks) will be at a proposed transfer price of ~37B yen ($315 million), resulting in a consolidated capital gain before taxes of ~15 billion yen ($128 million).