Toshiba, Bain sign MOU for chip unit - update

Bain’s consortium, which also includes the Innovation Network Corporation of Japan and the Development Bank of Japan, was named the preferred bidder for the unit, Toshiba Memory Corporation (TMC), earlier this year, reportedly offering around JPY2 trillion ($18 billion). In a statement, Toshiba said the group had made a new proposal during subsequent negotiations. It did not disclose financial terms of the revised offer.

In a separate statement, Bain indicated that its new proposal includes the original members of the consortium, along with a number of strategic partners including Apple, Dell, Kingston and Seagate. The firm said its proposal represents "the best possible outcome for Toshiba" by ensuring that TMC remains independent and based in Japan.

The MOU is non-binding and Toshiba said it is still open to negotiations with other bidders. Western Digital, which operates a Nand flash manufacturing plant in Japan as a joint venture with Toshiba, has also made an offer for the company with KKR, as has a consortium including Foxconn.

In addition to submitting its own bid for TMC, Western Digital has filed a request for injunctive relief to block the sale of the company to Bain until completion of an arbitration tribunal, claiming that its JV agreement gives it veto power over any sale of the wider division.

Following Toshiba’s announcement, Western Digital said it was “disappointed that Toshiba would take this action despite Western Digital's tireless efforts to reach a resolution that is in the best interests of all stakeholders” and that it would continue to pursue its arbitration request. Bain, in its statement, said the consortium plans to honor Western Digital's contractual benefits, but called the company's position "over-reaching" and said that Toshiba has sued Western Digital for over $1 billion in damages for interfering in the sale process.

Toshiba was forced into selling the Nand business due to its deteriorating financial position in the wake of its Westinghouse nuclear power unit filing for bankruptcy. The company posted revised net sales of JPY4.87 trillion for the 12 months ended March 2016, down from JPY5.14 trillion the previous year. As a result of write-downs tied to Westinghouse, its net loss widened to JPY950 billion from JPY460 billion.

The storage and electronic device solutions division, of which the Nand business is a part, generated sales of JPY1.7 trillion in 2016, up from JPY1.57 trillion the previous year. It was comfortably the best performing part of Toshiba’s business, with operating income of JPY247 billion, compared to a loss of JPY100 billion in 2015.

Toshiba said it is hoping to finalize the sale agreement before the end of September. The company needs to gain regulatory approval for any deal before the end of the financial year in March in order to secure the funds needed to cover the Westinghouse losses.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• North Asia
• Technology
• Buyouts
• Japan
• Bain Capital Asia
• Innovation Network Corp. of Japan (INCJ)
• The Development Bank of Japan (DBJ)