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Toshiba agrees to sell microchip business to Bain group-led buyers

Western Digital was one of the bidders but said it was confident about its legal position in Toshiba's chip business

Reuters  |  Tokyo 


Corp said on Wednesday it has agreed to focus on selling its prized chips unit to a group led by Capital and South Korean chipmaker SK Hynix, although it is not ruling out a deal with other bidders.

The announcement came after sources told Reuters on Tuesday that was now favouring the group after failing to bridge disagreements with rival suitor Corp.

Wednesday marks the third time the embattled Japanese conglomerate has failed to meet a target date to sell the $18 billion business - the world's second-biggest producer of NAND

Without an agreement soon, it will be difficult for to gain by the end of the financial year in March, regulatory approval and hence the funds it needs to cover billions in liabilities at it US nuclear unit.

said in a statement it had signed a memorandum of understanding with to accelerate discussions, and hoped to reach agreement in late September. But it added that the memorandum was not legally binding and did not prevent it from negotiating with other parties.

A representative for was not immediately available for comment, while SK Hynix declined to comment.

Western Digital, which jointly invests in Toshiba's key NAND memory plant but which has been at loggerheads with the Japanese firm for much of the auction - said it was disappointed as well as surprised at the development given its legal position.

"We remain confident in our ability to protect our JV interests and consent rights," the California-based firm said in a statement.

Sources have said that discussions with faltered as Toshiba, fearing its partner was angling to eventually take over the chip business, sought to limit the US firm's future stake in the unit.

The group's latest offer is worth 2.4 trillion yen ($22 billion), including a 200 billion yen investment in infrastructure, they said, declining to be identified as the talks were private.

The group had been chosen preferred bidder in June. But those talks lapsed as government investors who had been part of that consortium told they were reluctant to close a deal in the face of legal challenges posed by

The current offer by and Hynix is designed to get around the legal risks by inviting the state-backed investors - the Innovation Network Corp of and the Development Bank of - to invest in the business only after any arbitration with is settled.

But it remains uncertain whether will be able to complete the transaction by the end-March as is likely to seek a court injunction on the sale. A California court has ordered to give the US firm two weeks' notice before a deal is closed.

SK Hynix's participation could also prolong antitrust reviews, industry watchers said. The South Korean chipmaker plans to limit its role to financing, but it's unclear if it hopes to gain a stake in the future.

If does fail to secure sufficient financing by end-March, it is likely to report negative net worth, or liabilities exceeding assets, for a second year running - a scenario that could result in a delisting from the Tokyo Stock Exchange.

Shares of ended flat, while SK Hynix shares rose 1.3 percent.

First Published: Wed, September 13 2017. 14:18 IST