Toshiba to hold off picking buyer of chip unit again as it weighs Western Digital rival’s offer

Kyodo

Toshiba Corp. has once again decided to hold off on making a decision on the buyer of its chip unit at a board meeting as negotiations with a Western Digital Corp.-led group have stalled, sources said Tuesday.

Toshiba is scheduled to hold a board meeting Wednesday but will not be able to pick a buyer for Toshiba Memory Corp. as expected because it is now also looking at a bid made by a Japan-U.S.-South Korean consortium it had initially picked as its favored bidder.

The consortium, which includes the Innovation Network Corp. of Japan, the Development Bank of Japan, U.S. fund Bain Capital and South Korean chipmaker SK Hynix Inc., has offered to pay ¥2.4 trillion ($21 billion) for Toshiba’s chip unit.

Toshiba President Satoshi Tsunakawa told the conglomerate’s main creditors Tuesday that the company is now also considering selling Toshiba Memory to the Japan-U.S.-South Korean group but needed one more week for a final decision, the sources said.

The latest decision comes after Toshiba had been inclined to seal a deal with a group led by Western Digital, which has jointly invested in Toshiba’s Yokkaichi flash memory plant in central Japan.

The months-long chaotic bidding process could show more twists as Western Digital may make concessions that would sway Toshiba’s decision to sell the chip unit to the rival bidder.

Toshiba is hoping to quickly sell the chip unit to cover up massive losses stemming from its now-bankrupt U.S. nuclear unit. Unless it sells Toshiba Memory by next March to cover the losses and eliminate its negative net worth, it will face a forced delisting from the Tokyo Stock Exchange.

Toshiba is running out of time as it would typically take more than six months to receive clearance for the chip unit deal from regulators in major countries.

Western Digital and Toshiba have been struggling to find common ground in their negotiations for Toshiba Memory following an escalating legal dispute over whether the Japanese company needs its U.S. partner’s consent for the sale of the chip unit.

To speed up lengthy antitrust screenings, Western Digital had offered to not make initial investments in Toshiba Memory, planning to take voting rights of less than 16 percent when the chip business goes public. But negotiations between the two firms have stalled after Western Digital started demanding it acquire more than one-third of voting rights in the future, which means gaining veto power on crucial issues.

In a plan offered in late August, the Japan-U.S.-South Korean group had said that Bain Capital and other entities in the group would take over INCJ and DBJ’s investment until the legal spat with Western Digital is resolved while raising the price tag for Toshiba Memory Corp to 2.4 trillion yen, becoming a strong contender.

But whether Toshiba will really be able to sell Toshiba Memory remains in question, as the sale could be blocked if the legal case goes against the Japanese company.