Toshiba Corp has finally signed a ¥2 trillion (£13bn) deal to sell its prized chips unit, Toshiba Memory Company (TMC), to a consortium led by private equity giant Bain Capital.
The consortium, which also consists of tech names such as Apple and Dell, staved off competition from bidders including Western Digital, Toshiba's chips partner which threatened to seek an injunction to block any deal which didn't have its approval.
But having battled through that, there are already signs of discord in the eight-strong consortium as a press conference to announce the victorious bid was cancelled due to what one source called “issues” held by one of the legal teams.
“This is a positive outcome for both the company and the broader industry as it ensures an independent Toshiba Memory Company,” said David Gross-Loh, a managing director of Bain.
The business will remain in Japan and continue to develop its leading semiconductor technology supported by significant capital investments planned by our consortium.
Bain added that its bid was accepted due to the offer price, the ability to secure growth due through investment to the deep pockets of the buyers, the job security for TMC's employees, the commitment to protect the technology in Japan and the likelihood of securing competition approval.
The other bidders
Japanese companies will still own more than 50 per cent of TMC, as Toshiba will reinvest ¥350.5bn and optics firm Hoya will put in ¥27bn. Korean semiconductor firm SK Hynix has also bought a ¥395bn stake, but will be “firewalled” from accessing proprietary information and will be banned from owning more than 15 per cent of the voting rights for 10 years.
US bidders including Apple, Kingston Technology, Seagate and Dell, will invest a combined ¥415.5bn and will not acquire any commons stock or voting rights.
The Innovation Network Corporation of Japan and the Development Bank of Japan, independent bodies dedicated to promoting industrial competition, have also expressed interest in investing at a later date.
A bumpy road ahead
Disputes are still ongoing with Western Digital, which runs a number of joint ventures with TMC through its SanDisk subsidiary. It wants to block Toshiba's interests in any of these ventures from transferring to the new buyers, but Toshiba said it expects the deal to go ahead even without those interests unless Western Digital manages to get an injunction against the whole of TMC's stock.
For Toshiba, the close of the deal will provide some relief. The conglomerate has been crippled by liabilities from its bankrupt nuclear unit Westinghouse, and if it ends a second year in negative net worth then the Tokyo Stock Exchange could be pressured to boot it from the bourse.