Toshiba to delay finalisation of sale
• US court does not rule on Western Digital’s request for an injunction, but arbitration of dispute will continue on a separate track
Toshiba, facing a court challenge to the sale of its chip unit by manufacturing partner Western Digital, agreed to hold off closing the deal until a hearing on July 28.
Toshiba, whose sale of its chip unit is being challenged in court by manufacturing partner Western Digital, has agreed to delay closing the deal until a hearing on July 28.
Toshiba would proceed with negotiations and contract signing in the meantime, the Tokyobased company said.
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 did not 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 stay 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.
The two companies released statements with differing interpretations of what transpired in court on Friday. Toshiba said the judge proposed a “finessed” alternative to a preliminary injunction, while Western Digital said the hearing amounted to court protection.
“Our entire goal was to preserve and protect our rights through the binding arbitration process and that’s precisely what the court has done today,” Western Digital CEO Steve Milligan said in a statement.
In May, Western Digital invoked an arbitration clause in the business agreement, seeking to block Toshiba’s transfer of ownership of the unit to a separate legal entity in preparation for a sale. Toshiba, which has since reversed that transfer, then had its lawyers send a letter demanding that the US company stop its “harassment” as it seeks to sell the business.
The court’s decision has no bearing on the outcome of the arbitration, which will proceed on a separate legal track.
In June, Toshiba said a group led by the Innovation Network Corporation of Japan, Bain Capital and other investors were the preferred bidders for the semiconductor business and that it was aiming to reach a final agreement and close the deal by March 2018.
The consortium was offering ¥2.1-trillion ($19bn) for the unit, people with knowledge of the matter have said.
South Korean chip maker SK Hynix will join the group by providing only loans to avoid anticompetition hurdles.
The group aimed to finalise the deal this week, Innovation Network chairman Toshiyuki Shiga told reporters in Tokyo on Friday. It was possible that the lawsuit filed by Western Digital to stop the sale could have some effect on the timing, he said.
SK Hynix would contribute ¥520bn to the bid and was seeking to make part of the financing convertible into equity, Japan’s Asahi newspaper reported on Saturday. Another consortium member, Japan Post Bank, would contribute ¥30bn, while Toshiba would contribute ¥200bn, the newspaper said, without citing anyone. An SK Hynix spokesman declined to comment.