Broadcom, KKR compete for Toshiba unit

Toshiba’s future as a public company depends on selling the memory chip unit

Broadcom Ltd. and a group led by KKR & Co. were emerging as the two leading bidders for Toshiba Corp.’s semiconductor unit as of yesterday, the deadline for secondround offers, according to people familiar with the matter.

Broadcom, based in San Jose, California, is offering about 2.2 trillion yen (Dh73.5 billion; $20 billion) and would face simpler regulatory reviews than some rivals, said one of the people, asking not to be identified because the matter is private. The competing group, which The auction has been rattled by fierce clashes between Toshiba and Western Digital. The two companies co-own the most important factory in the Japanese company’s memory chip business, a plant in Yokkaichi. Western Digital has argued that under their joint venture agreement Toshiba needs its approval to sell the business — and that Western Digital should have exclusive rights to negotiate a purchase.

Toshiba has warned the American company not to interfere. It has also pointed out that Western Digital only became its partner by acquiring SanDisk last year, in a deal that Toshiba never had rights to approve. includes state-backed Innovation Network Corp. of Japan (INCJ) and Development Bank of Japan, plans to offer about 1.8 trillion yen and would benefit from support from the country’s government, the people said. Western Digital Corp. has been in talks to join the Japan group, but the parties haven’t been able to agree on how to divvy up ownership. The company has been offered a stake of less than 20 per cent, but it wants a controlling share, they said. Apple Inc., which uses Toshiba memory chips in its products, is still considering whether to contribute capital to one or more bidders, they said.

Toshiba’s future as a public company depends on selling the memory chip unit and raising cash to pay for losses in its Westinghouse nuclear business. Time is critical because its shares may be delisted if it hasn’t closed the deal by next March, the end of its fiscal year. While Taiwan’s Hon Hai Precision Industry Co. and South Korea’s SK Hynix Inc. have also expressed interest with preliminary bids of $27 billion, Japan’s government is reluctant to let the business fall into their hands.

Fluid sale

The deal talks are still fluid however and the leading bidders may change.

“Whoever INCJ decides to go with, is likely to be the winner, regardless of the size of the bid,” said Damian Thong, an analyst at Macquarie Group Ltd.