Western Digital, KKR resubmit bid for Toshiba memory unit

Western Digital and Toshiba have a Nand flash manufacturing plant in Japan, and the US company believes it has right of veto over any sale of the wider division. After losing out to the rival consortium – which it claimed included rival chipmaker SK Hynix – Western Digital reiterated that Toshiba had no right to transfer the joint venture interests to a third party without its consent.

The company announced on June 27 that it had “resubmitted a bid with KKR where Western Digital will provide debt financing to facilitate a sale by Toshiba Corporation of its interests in the Nand flash memory joint ventures." It added that: "Western Digital continues to believe it is the best partner to advance Toshiba's legacy of technology innovation in Japan."

The consortium chosen by Toshiba to buy the Nand business is led by the Innovation Network Corporation of Japan (INCJ), a government-controlled investor, and features Development Bank of Japan as well as Bain. Toshiba said the offer represented the best proposal “not only in terms of valuation, but also in respect to certainty of closing, retention of employees, and maintenance of sensitive technology within Japan.”

Toshiba responded to Western Digital’s announcement by saying that it has reviewed all proposals and is currently finalizing an agreement with the preferred bidder. The company wanted to have an agreement in place for presentation at its shareholder meeting on June 28. In order to remain a listed company, it must close the deal before March 2018.

Earlier this month, Western Digital filed a request for injunctive relief seeking to prevent transfer of the joint venture interests until completion of an arbitration tribunal. A US court will hear the injunction request on July 14.

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.

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