Toshiba in $18b deal to sell chip unit

The Gulf Today - Business - - Front Page -

TOKYO: Ja­pan’s Toshiba Corp said on Thurs­day it had signed an $18 bil­lion deal to sell its chip unit to a con­sor­tium led by Bain Cap­i­tal LP, over­com­ing a key - al­beit not its last - hur­dle as it scram­bles for funds to stave off a po­ten­tial delist­ing.

The sale of the unit - the world’s sec­ond big­gest pro­ducer of NAND chips - was agreed last week af­ter a tor­tu­ous auc­tion process but the sign­ing was de­layed be­cause con­sor­tium mem­ber Ap­ple Inc de­manded new terms on chip sup­ply, sources fa­mil­iar with the mat­ter have said.

The deal will see Toshiba rein­vest in the unit and to­gether with Hoya Corp, a med­i­cal tech­nol­ogy firm that also makes parts for chip de­vices, Ja­panese firms will hold more than 50 per­cent of the busi­ness - a keen wish of the Ja­panese gov­ern­ment.

A Ja­panese state-backed fund and bank have also ex­pressed their in­ter­est in in­vest­ing in the fu­ture sub­ject to cer­tain con­di­tions, Toshiba said in a state­ment.

“With this deal, a lot of risks for Toshiba have dis­ap­peared. It can go back to be­ing a nor­mal com­pany,” said Hideki Ya­suda at Ace Re­search In­sti­tute.

Pres­sure from the Ja­panese gov­ern­ment, chang­ing al­liances among suit­ors and a slew of re­vised bids has drawn out the auc­tion over nine months - height­en­ing the risk that the deal may not close be­fore the end of Ja­pan’s fi­nan­cial year in March as reg­u­la­tory re­views usu­ally take at least six months.

If the deal does not close be­fore then, Toshiba - hurt by li­a­bil­i­ties at is now bank­rupt nu­clear unit West­ing­house - is likely to end a sec­ond con­sec­u­tive year in neg­a­tive net worth, putting pres­sure on the Tokyo Stock Ex­change to strip it of its list­ing sta­tus.

The sale also faces le­gal chal­lenges from West­ern Dig­i­tal , Toshiba’s chip ven­ture part­ner and re­jected suitor, which is seek­ing an in­junc­tion to block any deal that does not have its con­sent.

West­ern Dig­i­tal, one of world’s lead­ing mak­ers of hard disk drives, paid some $16 bil­lion last year to ac­quire San­disk, Toshiba’s chip joint ven­ture part­ner since 2000. It sees chips as a key pil­lar of growth and is des­per­ate to keep the busi­ness out of the hands of ri­val chip­mak­ers.

In ad­di­tion to Ap­ple, Bain’s con­sor­tium in­cludes South Korean chip­maker SK Hynix, as well as Dell Inc , Sea­gate Tech­nol­ogy Plc and Kingston Tech­nol­ogy.

Un­der the deal, Toshiba will hold 40.2 per­cent of vot­ing rights in the chip unit and Hoya Corp will own 9.9 per­cent, while other mem­bers will hold a com­bined 49.9 per­cent, ac­cord­ing to SK Hynix.

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