Bain-led consortium to purchase Toshiba chip unit for $18 billion
Toshiba Corp.’s board agreed to sell its flash memory chip unit to a group led by Bain Capital for two trillion yen (US$18 billion), taking an important step toward ending a contentious bidding process that has stretched over eight months.
The Bain consortium includes backing from Japanese and overseas companies, including Toshiba, which will reinvest 350.5 billion yen, the company said in a statement. Apple Inc., Dell Inc., SK Hynix Inc. and Japan’s Hoya Corp., will provide financial support, according to people familiar with the situation. The iPhone maker played a crucial role in swinging momentum in the tumultuous auction to the Bain offer.
Apple is interested in the chip unit because of the strategic importance of flash memory. The compact chips are essential for its iPhones and iPods, storing every photo, video clip and animoji. Only a handful of firms make the highest-end technology and the dominant player is Samsung Electronics Co. The last thing CEO Tim Cook wants is to end up dependent on his archrival in smartphones, so he has a vested interest in ensuring Toshiba’s chips unit stays healthy.
Toshiba is selling off its chips business to pay for billions of dollars in losses in its U.S. nuclear business. It needs to raise the money by March to avoid seeing its shares delisted from the Tokyo Stock Exchange. Toshiba expects the deal to close by March 31 and aims to restore a positive net worth by the end of the fiscal year, according to the statement.
The auction has been complicated by legal action from Western Digital Corp., which has argued it should have veto rights in any sale because of its partnership with Toshiba in the chips business. The Japanese company disputes that and sued Western Digital for more than US$1 billion for interfering in the auction.
Western Digital has sued in court and filed for arbitration in California to make its case. As part of Wednesday’s agreement, Bain agreed to complete a deal regardless of the legal challenges.
If the dispute with Western Digital is unresolved at closing, three joint ventures between Toshiba and Western Digital would not be transferred to Bain and the purchase price would be adjusted, said one of the people, asking not to be identified because the matter isn’t public.
The Bain-led group was identified as a preferred bidder almost three months ago, but the process has been delayed by the lawsuits, government opposition and corporate indecision.