Business / Corporate

Western Digital seeks future voting stake of 16% in Toshiba Memory

Kyodo

Western Digital Corp. is planning to take just under 16 percent of the voting rights in Toshiba Corp.’s chip unit after it goes public in the future, sources close to the matter said Thursday.

The complicated monthslong bidding process surrounding Toshiba Memory Corp. could take a major step forward if Toshiba and Western Digital, a key member of one of the consortia bidding for the chip unit, can come to terms on how the U.S. company will be involved in is management — the focal point in the negotiations.

Toshiba aims to pick a buyer on Sept. 13 at its next board meeting, the sources said. In the mix are bids from a Japan-U.S.-South Korean consortium and Taiwanese tech giant Hon Hai Precision Industry Co., which recently acquired Sharp Corp.

To avoid prolonged antitrust reviews, Western Digital will make no investments should the group led by the U.S. firm acquire the chip business. Instead, it will take a stake when the unit makes an initial public offering about three years after its sale, the sources said.

The Western Digital group proposed ¥1.9 to ¥2 trillion ($18 billion) for Toshiba Memory. To acquire voting rights in the unit in the future, it plans to obtain and execute the right to buy shares at a fixed price.

The core members of the Western Digital group include the government-backed Innovation Network Corp. of Japan, the Development Bank of Japan and U.S. fund Kohlberg Kravis Roberts & Co.

Western Digital, Toshiba’s partner in the chip business, has dropped its initial proposal to buy ¥150 billion worth of Toshiba Memory’s convertible bonds and approached Apple Inc. about joining in an apparent bid to boost funding.

The company has demanded it receive an higher ratio of the flash memory chips produced at the chip plant in Mie Prefecture run jointly with Toshiba. Flash memory chips are used as a storage medium in smartphones and considered a core component for Apple.

Toshiba and Western Digital have been involved in a bitter legal dispute over whether the Japanese manufacturer needs its U.S. venture partner’s consent to sell the chip unit. The crisis-hit conglomerate is scrambling to sell the chip unit to rapidly raise cash to cover massive losses stemming from its now-bankrupt U.S. nuclear unit Westinghouse. The company will face delisting from the Tokyo Stock Exchange unless it eliminates its negative net worth by next March.