Toshiba's chip drama ends with sale to a financial group

Javier Stokes
September 21, 2017

The auction of the world's No. 2 producer of NAND chips has been marked by a slew of revised bids, changing alliances among suitors, as well as legal wrangling from joint venture partner Western Digital Corp WDC.O - a threat that still hangs over the sale. All because of the legal action launched by Toshiba's scorned JV partner in the chipmaking business, USA group Western Digital.

While Toshiba hasn't yet made an official announcement, the company is expected to announce the decision on its homepage later Wednesday.

Bain has agreed to close the deal even if the legal dispute with Western Digital is unresolved, said one of the people. The US buyout firm sought more financial support from Apple, asking for about $7 billion in capital, up from a previous agreement for about $3 billion, said a person familiar with the matter.

Taking a stake in Toshiba's memory chips business through Bain could give it a more reliable supply and enable it to become less dependent on rival Samsung, Bloomberg reports.

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Western Digital has also sued in court and filed for arbitration in California to make its case. Western Digital had originally been part of the KKR group, but agreed to withdraw because of opposition from Toshiba.

However, some industry experts argue that if the new Japanese shareholders of Toshiba's chip business refuse to share information regarding production and technology with SK Hynix, little to nothing is be gained for the South Korean chipmaker despite its high-profile months-long bid to win the battle for a piece of Toshiba.

Toshiba on September 13 signed a memorandum of understanding (MOU) with the Bain Capital-led consortium for the sale of its memory chip business. A month later, the American hard-drive manufacturer formed its own consortium that consisted of American private-equity firm Kohlberg Kravis Roberts, the Development Bank of Japan and Innovation Network Corp. and entered into negotiations by offering 2 trillion yen. Apple, Dell and other United States tech firms have also reportedly joined the consortium.

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