(Adds details on Toshiba operations and financial results, other bidders, plus market reaction.)
By Tor Ching Li Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--Reflecting a shift in focus from the cyclical computer chip business to the more stable and growing energy market, Toshiba Corp. (6502.TO) plans to further its nuclear power ambitions with a Y400 billion to Y500 billion bid for a unit of French group Areva (CEI.FR), a person familiar with the deal told Dow Jones Newswires Monday.
The diversified Japanese electronics company is likely to bid for Areva's electricity transmission and distribution, or T&D, operations during the first round of an auction process to be held later this month, the person said.
French state-controlled Areva is putting the 30,000 employee-strong unit up for sale to help finance the rest of its nuclear operations. The cash-strapped firm has previously said it aims to select a buyer for its T&D unit by the end of the year. Credit Suisse is advising Areva on the sale.
The T&D unit posted revenue of EUR5.06 billion and operating profit of EUR560 million in the fiscal year ended March 2009.
Toshiba, which is now focusing on its power generation equipment business as a growth area, acquired U.S. nuclear plant Westinghouse Electric Co. for around Y500 billion in 2006.
Acquiring Areva's power operations would make the Japanese conglomerate's nuclear power and infrastructure division its biggest revenue generator and put the unit on track to hit its target of generating Y3 trillion in sales by 2011.
For the fiscal year ended March, Toshiba reported its largest-ever net loss of Y343.6 billion, weighed down by its chip operations. Toshiba, the world's second-largest producer of NAND flash memory chips, is in the midst of a major overhaul of its chip operations. As part of this process, the company said Monday it is considering outsourcing part of the production of advanced system chips used in digital home electronics to an overseas foundry.
Toshiba shares rose 3.4% to close Monday at Y482 on news of its outsourcing and Areva bid plans.
Power Struggle Amongst Nuclear Players
Heavyweights in the nuclear industry have been quick to zoom in on Areva for buying opportunities.
Mitsubishi Heavy Industries (7011.TO), which lost out to Toshiba in a tussle for Westinghouse Electric, told Dow Jones that it will consider taking a stake in Areva - with which it has operational tie-ups - if the French government offers it an opportunity to do so.
Some analysts are skeptical of Toshiba's ability to fund the acquisition of Areva's T&D unit.
A Nomura Securities analyst report says Toshiba is financially not in a position to fund any acquisition without further capital raising. Toshiba had just raised Y500 billion in fresh equity in June to help boost its balance sheet, which was dogged by write-downs and losses amid falling consumer demand.
The company had approximately $3 billion of cash-at-hand at the end of June and filed a shelf registration with Japan's Ministry of Finance in July to issue around $2 billion in domestic corporate bonds over the next two years.
French industrial peers Alstom SA (ALO.FR) and Schneider Electric SA (SU.FR) said July 23 that they are also considering making a joint bid for the unit, with Alstom eying the transmission part and Schneider looking to take the distribution operations.
Other bidders reportedly interested in the unit include China Investment Corp., China's sovereign wealth fund, according to French paper Les Echos.
A spokeswoman for Areva declined to comment but said a meeting of Areva's supervisory board is due to take place Tuesday.
-By Tor Ching Li, Dow Jones Newswires; 813-03-6875-7565; firstname.lastname@example.org
Copyright (c) 2009 Dow Jones & Company, Inc.