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Chip sweepstakes wind down as Toshiba inks ¥2 trillion deal with Bain group

Bloomberg, JIJI

Toshiba Corp. signed a final agreement to sell its flash memory chip business to a group led by Bain Capital for about ¥2 trillion ($18 billion), moving a step closer to completing the deal after months of contentious negotiations.

The Bain consortium includes major technology players Apple Inc., Dell Inc., SK Hynix Inc. and Japan’s Hoya Corp., while Toshiba itself will maintain a stake, the company said in a statement Thursday. The total value of the transaction may change, depending on capital expenditures. The deal is aimed at keeping control of the important business in Japan, while securing the funding needed to help Toshiba repair its damaged balance sheet.

The news came after a Toshiba executive said Wednesday that a final agreement on the sale was expected “within this month.”

“Major challenges have been cleared and the company is now preparing related documents,” Toshiba’s Corporate Senior Executive Vice President Yasuo Naruke told reporters Wednesday at the Mie Prefectural Government’s office in Tsu.

Also on Wednesday, SK Hynix decided at a board meeting to invest about ¥395 billion in Toshiba Memory. SK Hynix will undertake convertible bonds, a measure allowing the firm to obtain Toshiba Memory shares carrying voting rights of 15 percent in the future.

Apple is interested in the chip unit because of the strategic importance of flash memory. The compact chips are essential for its iPhones and iPods, storing photos, video clips and phone numbers. Only a handful of companies make the highest-end technology and the dominant player is Samsung Electronics Co., a rival in smartphones that controls about 40 percent of the market for flash memory.

Toshiba is selling off its chip business to pay for billions of dollars in losses in Westinghouse, its U.S. nuclear business. The company needs to raise the money by March to avoid seeing its shares delisted from the Tokyo Stock Exchange.

Toshiba plans to complete the sale procedures by the March 2018 end of fiscal 2017 after clearing antitrust screenings in related countries. The timing is meant to avoid a second consecutive year of debts exceeding assets, which would lead to being delisted from the Tokyo Stock Exchange. Toshiba was demoted to the TSE’s second section in August.