As Toshiba Corp seeks to revive a stalled $18 billion sale of its chip business, banking sources said that the Japanese company is in talks with Western Digital Corp and Taiwan’s Foxconn, as well as with an already preferred bidder.
The Japanese company had previously set a self-imposed June 28 deadline for reaching an agreement with its preferred bidder – which is composed of a group including the state-backed fund Innovation Network Corp of Japan (INCJ), the Development Bank of Japan (DBJ), U.S. private equity firm Bain Capital and South Korean chipmaker SK Hynix Inc. but the company has been unable to stick to that deadline. While the Japanese conglomerate noting that it had been unable to reach an agreement, it also confirmed it was in talks with suitors.
There were no immediate comments from Foxconn, the world’s largest contract electronics maker, formally known as Hon Hai Precision Industry and no comments available from Western Digital.
Sources say that in a step that could eventually give it an equity interest in the world’s second-largest maker of NAND flash memory chips, proposals by SK Hynix that it helps fund a deal through convertible bonds have been stalled.
In a stance that it has taken to satisfy a Japanese government keen to keep Toshiba’s technology under domestic control, Toshiba doesn’t want its South Korean rival to have an equity or management influence in the chip business.
Because talks with the consortium had stalled, Toshiba told its creditor banks at a meeting on Tuesday that it had begun talks with alternative bidders.
“Toshiba had no option but to say it’s in talks with other suitors because the preferred consortium is falling through,” said another news report quoting an official involved in the talks, who also requested anonymity as those negotiations are sensitive.
In order to avoid an automatic delisting of its shares from Tokyo’s stock market and to plug a hole in its balance sheet by the fiscal year-end in March, Toshiba needs to sell its chip business.
When it was hit by billions of dollars of cost overruns at its now bankrupt U.S. nuclear unit Westinghouse in December, the 140-year-old laptops-to-nuclear conglomerate was still recovering from a $1.3 billion accounting scandal in 2015.
A deal with Western Digital could be backed by INCJ and DBJ, said to be wary of SK Hynix, sources have said.
Since Western Digital bought SanDisk, Toshiba’s memory chip business partner, in May last year, ties between the two companies have been strained, and sources say that therefore Toshiba executives have been reluctant to consider a deal with Western Digital.
In order to prevent Toshiba selling the chip unit without its consent, Western Digital sought a U.S. court injunction last month.
It matched rival bidders’ offers to buy the flash memory unit, Western Digital said in July 7 court documents. However, the actual dollar figure of the bid was redacted.
(Adapted from Reuters)