Toshiba misses deadline for deal
TOSHIBA missed a self-imposed deadline to sell a piece of its valuable microchip business yesterday, inflicting a fresh wound on its efforts to repair its battered finances.
The company’s admission that it had not completed a deal with its chosen buyers – a consortium of investors from Japan, the United States and South Korea – came as a rival bidder, the US company Western Digital, said it had submitted a new offer for the chip unit.
“We are continuing to negotiate with the consortium,” Toshiba said in a news release, “but coordinating with its various members is taking time, and we have not reached an agreement”.
Stung by losses from nuclear power projects in the United States, Toshiba is selling a still-undisclosed portion of the microchip business to raise cash. The business makes NAND flash memory chips used in cellphones and other digital devices, and analysts say it could be worth 2 trillion yen, or about $18 billion.
The buyers Toshiba chose last week include a Japanese government-controlled investment fund, the Innovation Network Corp; the Development Bank of Japan, a state-owned bank; and the US buyout firm Bain Capital. The South Korean technology company SK Hynix is to provide loans to finance the deal.
Toshiba had intended to sign a final agreement with the group before its annual shareholder meeting yesterday.
The company needs a deal to fill a vast hole in its balance sheet. The losses at its US nuclear power division, Westinghouse Electric, have cast “substantial uncertainty” over the century-old company’s ability to stay in business, Toshiba has said in financial statements.
That has threatened the survival of a sprawling technology giant that has long been a pillar of Japanese industry.
One factor complicating the chip sale has been Western Digital. The company is an owner, with Toshiba, of a NAND production operation in Japan that is part of Toshiba’s larger microchip subsidiary under negotiation. Western Digital argues that Toshiba cannot sell to an outside party without its approval.
Yesterday Western Digital said it had made a renewed offer with its partner in the bid, the US investment firm Kohl- berg Kravis Roberts. It did not disclose terms, except to say that it was willing to provide Toshiba with debt financing.
“Western Digital continues to believe it is the best partner to advance Toshiba’s legacy of technology innovation in Japan,” Western Digital said in a statement.
Two people familiar with the sale process who were not authorised to speak to the news media have said Western Digital is offering less money than the consortium Toshiba favours. That has left Toshiba with a dilemma: accept a lower offer or take the higher one and risk what could be a long and costly legal fight with Western Digital.
Western Digital has asked a California state court to block any sale while also pursuing arbitration in the Paris-based International Court of Arbitration. A hearing is scheduled for July 14.
Toshiba said last week that the JapanUS-South Korea group presented “the best proposal” in terms of price, promises to retain staff and the ability to keep sensitive technology within Japan. It has rejected Western Digital’s claim that it has de facto veto power over a sale.