Friday, 15 December, 2017

Toshiba to sell prized chip unit to Japan-US-South Korean syndicate

Pedestrians walk past a logo of Toshiba Corp outside an electronics retailer in Tokyo Pedestrians walk past a logo of Toshiba Corp outside an electronics retailer in Tokyo
Cecilia Poole | 21 September, 2017, 00:33

Toshiba Corp.'s board has agreed to sell its chip unit to a group led by Bain Capital, with the assurance that the buyout firm will complete a deal regardless of legal challenges from Western Digital Corp., according to people familiar with the matter.

Toshiba was forced to sell the unit in order to finance significant losses incurred after it made a deal to acquire a U.S. nuclear company.

Bain's motive for the purchase is the potential surge of high demand for the chips in the market and looking to sell it to big buyers.

While the talk between Toshiba and Western Digital reached an impasse Toshiba announced last week that it would once again focus on negotiations with the Bain-led consortium.

In response to the MOU, Western Digital said it was surprised Toshiba would look to do a deal with Bain "without SanDisk's consent, as the language in the relevant JV agreements is unambiguous, and multiple courts have ruled in favor of protecting SanDisk's contractual rights".

Analysts have said the sale of the memory business could be key to turning around Toshiba's overall business. This followed Toshiba's admission in 2015 that it had inflated its earnings by $1.2 billion over seven years-a scandal that company investigators connected in part to Westinghouse nuclear-project managers, who they said had disguised faltering revenues and cost overruns, The New York Times reported at the time. Bain later said it was working with a "broad list of strategic partners" including Apple, Dell, Kingston and Seagate. The consortium includes United States fund Bain Capital, Development Bank of Japan and SK hynix.

Then Bain, revised its offer as well. Foxconn reportedly asked for Apple's support to back the bid. It's not clear exactly how much capital Apple will ultimately contribute to the offer.

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