Western Digital Corp tries to arm twist Toshiba for entering into exclusive talks

Western Digital has more than its foot in the door and is trying to capitalize on its existing joint venture with Toshiba.

In a development of strategic nature, Western Digital Corp has shot off a letter to Toshiba, with whom it has a joint venture for producing chips, warned that the splitting off its chip unit prior to a planned sale of the business essentially violates their joint chip venture contract.

Western Digital Corp has indicated a way out of a potential lawsuit saying it wants to enter into exclusive talks.

In its letter dated April 9, Western Digital said the split-off is a “very serious breach of joint venture agreements,” and it would not sit idly by while Toshiba “runs roughshod” over its rights.

The letter however did not threaten legal action.

Western Digital’s letter will complicate the sale of Toshiba’s NAND Chip unit, which it has put up for sale after having valued it at $18 billion.

For Toshiba this sale is essential since its proceeds will cover the writedown of its U.S. nuclear unit Westinghouse, which has plunged it into a crisis.

Toshiba’s spokeswoman was not immediately available to comment.

On its part, Western Digital is maintaining that the auction process was not in the best interest of Toshiba’s stakeholders and that it wants to enter into exclusive talks with the Japanese conglomerate.

Its rumored bids of between $18 billion to $27 billion (2 trillion yen to 3 trillion yen) were well above the fair and supportable value of the chip business, wrote Western Digital’s CEO Stephen Milligan in the letter to Toshiba’s board of directors.

Firing a salvo at Broadcom, who has emerged as the highest bidder in the first bidding round, Western Digital said each of the rumored bidders are highly problematic for both the joint ventures as well as for Japan. Western Digital has specifically named Broadcom Ltd in the letter stating it had grave concerns regarding the company based on recent commercial dealings with it.

Despite the size of its bid, Foxconn is unlikely to win a bid, since the Japanese government has vowed to vet bidders and block a sale to investors whom it deems as a risk to national security.

Since Foxconn has deep ties with China, it is considered a risk.

($1 = 109.7100 yen)

Categories: Creativity, Entrepreneurship, Geopolitics, HR & Organization, Regulations & Legal, Strategy

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