Toshiba to hold chip unit deal until July 28 court hearing

Tokyo, Japan - Toshiba Corp, whose sale of its chip unit is being challenged in court by manufacturing partner Western Digital Corp, agreed to hold off closing the deal until a hearing on July 28.

Toshiba will proceed with negotiations and contract signing in the meantime, the Tokyo-based company said in a statement. The two companies were in court in the US on Friday for a hearing on Western Digital’s request for a preliminary injunction to block the sale. The Superior Court of California suggested the companies work on a proposal for providing Western Digital with two weeks’ advance notice of the sale and didn’t rule on the US company’s injunction request.

The relationship between the two companies has deteriorated as Toshiba moves to complete the sale of its flash-memory division by March. While Toshiba needs to raise cash to keep afloat following losses in its nuclear division, Western Digital has sought to block the deal on concerns the chip unit may end up with competitors. Whatever the court rules on July 28, the companies face arbitration proceedings that will ultimately determine which prevails.

Toshiba said California Superior Court Judge Harold Kahn proposed a ‘finessed’ alternative to a preliminary injunction, while Western Digital said the hearing amounted to court protection.