New York/San Francisco/Tokyo —
Toshiba’s struggle to sell its chip division took two new twists on Tuesday.
Western Digital said it would seek an injunction to block the sale, and KKR was reported to have asked Apple — currently part of the Bain-led group picked by Toshiba last week — to switch sides.
The latest legal action by Western Digital, the US firm that jointly invests in Toshiba’s main chip plant, comes in the wake of the Japanese conglomerate’s decision last week to sell the unit to a consortium led by Bain Capital and South Korean chipmaker SK Hynix.
The $18bn agreement with the Bain group is, however, still unsigned, with Toshiba telling its main banks this week that Apple, a member of the consortium and an important client, had yet to agree to key terms.
And, according to a person familiar with the discussions, KKR is trying to persuade Apple to switch sides and join the private equity firm.
Switching to the KKR group from the Bain group would require Apple to become more comfortable with Western Digital’s role in its manufacturing joint venture partnership with Toshiba after the acquisition — and that may still prove a sticking point, said the person, who asked not to be identified because the matter is private.
Toshiba shares were little changed in Tokyo trading on Tuesday.
Western Digital’s injunction is being sought with the International Court of Arbitration, where the California-based company, which argues that no deal can be done without its consent, initiated proceedings against its partner earlier this year.
A panel of three arbitrators may be formed as early as this week and a decision on the injunction could come late this year before any deal closes, a source familiar with the matter said, declining to be identified due to the sensitivity of the matter. A final ruling on the dispute is not expected before 2019.
The contentious auction has underscored how high the stakes are, as rival suitors, the Japanese government and Toshiba’s creditor banks all squabble over the world’s second-biggest producer of NAND memory chips.
For Toshiba, a signed deal would come not a moment too soon as it needs to raise billions of dollars to cover liabilities arising from its now-bankrupt US nuclear unit Westinghouse before the end of the financial year in March. If it fails to do that, it could be delisted.
Even if Toshiba manages to sign the deal with the Bain group imminently, it is still cutting it fine as regulatory reviews usually take at least six months.
Apple, as the largest consumer of the type of chips Toshiba produces, is aiming to get the best deal on price and volume for a key component and has a vested interest in keeping the market competitive.
The compact chips are essential for its iPhones and iPods, storing every photo, video clip and animoji. Apple previously opposed a bid by KKR and Western Digital for the Toshiba unit in part because it would concentrate power within the chip industry.
Western Digital said on Tuesday that Toshiba’s decision was disappointing, given that it had made major concessions.
These included giving up its participation in the consortium it was part of, leaving KKR and a state-backed fund, the Innovation Network of Japan (INCJ), as the main investors. It also gave up on a plan to take a future equity stake.
It said it was vehemently opposed to a Bain deal, arguing that the inclusion of SK Hynix, a rival chip maker, heightens the risk of technology leaks and introduces the risk that the deal may not clear regulatory reviews — unlike the KKR/INCJ bid, which does not include a chip maker.
If KKR, meanwhile, is able to persuade Apple to switch sides at the last minute, it could upset a deal that had looked like it would end months of twists and turns in finding a buyer for Toshiba’s prized asset.
Bloomberg and Reuters
Toshiba’s struggle to sell its chip division took two new twists on Tuesday.
Western Digital said it would seek an injunction to block the sale, and KKR was reported to have asked Apple — currently part of the Bain-led group picked by Toshiba last week — to switch sides.
The latest legal action by Western Digital, the US firm that jointly invests in Toshiba’s main chip plant, comes in the wake of the Japanese conglomerate’s decision last week to sell the unit to a consortium led by Bain Capital and South Korean chipmaker SK Hynix.
The $18bn agreement with the Bain group is, however, still unsigned, with Toshiba telling its main banks this week that Apple, a member of the consortium and an important client, had yet to agree to key terms.
And, according to a person familiar with the discussions, KKR is trying to persuade Apple to switch sides and join the private equity firm.
Switching to the KKR group from the Bain group would require Apple to become more comfortable with Western Digital’s role in its manufacturing joint venture partnership with Toshiba after the acquisition — and that may still prove a sticking point, said the person, who asked not to be identified because the matter is private.
Toshiba shares were little changed in Tokyo trading on Tuesday.
Western Digital’s injunction is being sought with the International Court of Arbitration, where the California-based company, which argues that no deal can be done without its consent, initiated proceedings against its partner earlier this year.
A panel of three arbitrators may be formed as early as this week and a decision on the injunction could come late this year before any deal closes, a source familiar with the matter said, declining to be identified due to the sensitivity of the matter. A final ruling on the dispute is not expected before 2019.
The contentious auction has underscored how high the stakes are, as rival suitors, the Japanese government and Toshiba’s creditor banks all squabble over the world’s second-biggest producer of NAND memory chips.
For Toshiba, a signed deal would come not a moment too soon as it needs to raise billions of dollars to cover liabilities arising from its now-bankrupt US nuclear unit Westinghouse before the end of the financial year in March. If it fails to do that, it could be delisted.
Even if Toshiba manages to sign the deal with the Bain group imminently, it is still cutting it fine as regulatory reviews usually take at least six months.
Apple, as the largest consumer of the type of chips Toshiba produces, is aiming to get the best deal on price and volume for a key component and has a vested interest in keeping the market competitive.
The compact chips are essential for its iPhones and iPods, storing every photo, video clip and animoji. Apple previously opposed a bid by KKR and Western Digital for the Toshiba unit in part because it would concentrate power within the chip industry.
Western Digital said on Tuesday that Toshiba’s decision was disappointing, given that it had made major concessions.
These included giving up its participation in the consortium it was part of, leaving KKR and a state-backed fund, the Innovation Network of Japan (INCJ), as the main investors. It also gave up on a plan to take a future equity stake.
It said it was vehemently opposed to a Bain deal, arguing that the inclusion of SK Hynix, a rival chip maker, heightens the risk of technology leaks and introduces the risk that the deal may not clear regulatory reviews — unlike the KKR/INCJ bid, which does not include a chip maker.
If KKR, meanwhile, is able to persuade Apple to switch sides at the last minute, it could upset a deal that had looked like it would end months of twists and turns in finding a buyer for Toshiba’s prized asset.
Bloomberg and Reuters
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