West­ern Dig­i­tal staff loses ac­cess to fa­cil­i­ties as dis­pute es­ca­lates

New Straits Times - - Business - HIDEKI YA­SUDA

TOKYO: Toshiba Corp is mov­ing to block West­ern Dig­i­tal Corp em­ploy­ees from the flash-mem­ory ven­ture they share, af­ter a threat of le­gal ac­tion loomed over the in­creas­ingly bit­ter dis­pute over who gets to buy the Ja­panese com­pany’s chip unit.

West­ern Dig­i­tal in­voked an ar­bi­tra­tion clause in their busi­ness agree­ment, which could post­pone a sale.

Toshiba would go for­ward with plans to shut out West­ern Dig­i­tal’s work­ers from its flash mem­ory fa­cil­i­ties in Yokkaichi in cen­tral Ja­pan as well as dig­i­tal ac­cess to its net­works, said peo­ple fa­mil­iar with the mat­ter.

The es­ca­lat­ing stand­off be­tween the com­pa­nies over the chip sale could im­peril Toshiba’s plans to use cash from the di­vest­ment to plug a hole in its bal­ance sheet from a mas­sive loss in its nu­clear power busi­ness.

The United States disk drive maker fears the op­er­a­tions may fall into the hands of com­peti­tors, even though it prob­a­bly doesn’t have the fi­nan­cial where­withal to buy the unit it­self.

At the same time, Toshiba needs to sell the chips busi­ness soon to avoid post­ing neg­a­tive share­holder eq­uity for two straight years.

“Toshiba’s mem­ory busi­ness is very ap­peal­ing and has at­tracted a lot of po­ten­tial buy­ers,” said Hideki Ya­suda, an an­a­lyst at Ace Re­search In­sti­tute. “But West­ern Dig­i­tal, just com­ing out of a ma­jor ac­qui­si­tion it­self, sim­ply can’t af­ford it.”

Ear­lier this month, Toshiba said West­ern Dig­i­tal still had not signed a re­vised con­tract af­ter be­com­ing its flash mem­ory man­u­fac­tur­ing part­ner through the ac­qui­si­tion of SanDisk Corp last year — and that it must comply by yes­ter­day.

It’s not clear how many West­ern Dig­i­tal em­ploy­ees would be af­fected; SanDisk work­ers would con­tinue to have ac­cess.

In prepa­ra­tion for the di­vest­ment, Toshiba trans­ferred own­er­ship of the mem­ory unit to a sep­a­rate le­gal en­tity, but didn’t get per­mis­sion be­fore do­ing so, ac­cord­ing to West­ern Dig­i­tal. The two should en­ter bind­ing ar­bi­tra­tion to re­solve the dis­pute, it said.

“Toshiba’s at­tempt to spin out its joint ven­ture in­ter­ests into an af­fil­i­ate and then sell that af­fil­i­ate is ex­plic­itly pro­hib­ited with­out SanDisk’s con­sent,” said West­ern Dig­i­tal chief ex­ec­u­tive of­fi­cer Steve Mil­li­gan.

Toshiba said it hadn’t re­ceived any no­tice of ar­bi­tra­tion, and re­jected claims that the process was in breach of the joint ven­ture agree­ment. Bloomberg

Toshiba’s mem­ory busi­ness is very ap­peal­ing and has at­tracted a lot of po­ten­tial buy­ers... but West­ern Dig­i­tal sim­ply can’t af­ford it.

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