Toshiba steps up chip business talks with WD

Dhaka,  Mon,  25 September 2017
Published : 23 Aug 2017, 13:42:43
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Toshiba prioritises talks with Western Digital on chips business sale

Toshiba steps up chip business talks with WD
Reuters
Japan's Toshiba Corp is prioritising talks with Western Digital to sell its memory chip business, as negotiations with a previously preferred bidder have stalled, the Nikkei business daily reported on Wednesday.

Shares in the conglomerate, which is scrambling to sell its flash memory unit for around $18 billion to cover losses from its bankrupt US nuclear business Westinghouse, rose 4.6 per cent to 316 yen by the end of morning trade as the report lifted hopes of an imminent deal.

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.

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 said 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 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 per cent, the sources said, requesting anonymity because they were not authorised 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 last year as they failed to agree on terms of a new joint venture contract.
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