Toshiba prioritizes talks with Western Digital on chips business sale: Nikkei

Source:Reuters-Global Times Published: 2017/8/25 15:33:40 Last Updated: 2017/8/26 7:51:24

Japan's Toshiba Corp is prioritizing talks with Western Digital to sell its memory chip business, as negotiations with a previously preferred bidder have stalled, the Tokyo-based Nikkei business daily reported on Wednesday.

In June, Toshiba picked a consortium including Japanese government-backed funds, private equity firm Bain Capital and South Korean chip maker SK Hynix as the preferred bidder for the prized unit.

But the talks stalled after Western Digital, a partner in Toshiba's main chip plant, took Toshiba to court, arguing it needs to consent to a sale.

A subsequent legal battle between the two companies unnerved the state-backed funds, which demanded that Toshiba resolve the conflict before the sale.

Sources previously told Reuters that Toshiba had begun talks with Western Digital as well as Taiwan's Foxconn, whose official name is Hon Hai Precision Industry Co, in an attempt to revive the stalled auction process. Foxconn is a major contractor of Apple.

The Nikkei, without citing sources, said Toshiba CEO Satoshi Tsunakawa told lenders that it would focus on negotiating with Western Digital with the aim of agreeing to a deal by the end of the month.

A Toshiba spokesman declined to comment on the Nikkei report.

Sources have also said that Western Digital was offering around 2 trillion yen ($18 billion) and would form an alliance with US private equity firm KKR & Co as well as the two Japanese government-backed funds that are part of the preferred bidder group.

Western Digital plans to initially invest in the chip unit through debt financing and eventually take a stake of less than 20 percent, the sources said, requesting anonymity because they were not authorized to speak with media.

The sources have also said a deal could be difficult, however, as Toshiba's chips business executives were wary of a deal with the US company given the animosity between the two groups.

Ties between the two companies soured quickly after Western Digital bought SanDisk, Toshiba's memory chip business partner for 17 years, in May 2016 as they failed to agree on terms of a new joint venture contract.

The Japanese company wants to close the sale by the end of the fiscal year in March to ensure it does not report negative net worth, which is liabilities exceeding assets, for a second year running.

Back-to-back years of negative net worth would result in a delisting from the Tokyo Stock Exchange.

Given regulatory approvals could take over six months, the company has been hoping to reach a deal by the end of the month to ensure it can close the sale by the end of March.



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