THURSDAY, March 28, 2024
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Toshiba presents sale conditions to Western Digital consortium

Toshiba presents sale conditions to Western Digital consortium

TOKYO - In negotiations for the sale of its memory chip subsidiary, Toshiba Corp. has presented conditions to a consortium including Western Digital Corp. The conditions include that WD withdraw its lawsuit at the International Arbitration Court seeking to block the sale of the subsidiary, and that shares of the subsidiary be listed in the future, according to sources.

Toshiba sees the consortium as a potential purchaser of the subsidiary, Toshiba Memory Corp. The sources said that WD, a major U.S. semiconductor manufacturer, was positive toward the conditions during negotiations on Thursday. Negotiations for an agreement to be reached by the end of August are expected to significantly progress if WD accepts Toshiba’s conditions.  

 In June, Toshiba decided to prioritise negotiations for the sale of the subsidy with another consortium comprising Japanese, U.S. and South Korean entities. However, compromises were not made and an agreement has not been reached.Toshiba then began searching for a new potential purchaser, working under a framework in which it could also resolve the dispute with WD.
 

According to the sources, the current plan involves WD and Kohlberg Kravis Roberts and Co. (KKR), a U.S. investment fund, joining a consortium also comprising Innovation Network Corporation of Japan (INCJ), a public-private investment fund, and the Development Bank of Japan (DBJ), a government-affiliated financial institution. These entities would form a new business alliance to buy Toshiba Memory.
 Discussions are under way regarding a company that would be set up by the business alliance for the purpose of buying Toshiba Memory. The purchase is estimated to cost between ¥1.9 trillion and ¥2 trillion. It is believed that Toshiba will contribute ¥100 billion to the scheme; INCJ, DBJ and KKR will contribute ¥300 billion each; a group of banks including Sumitomo Mitsui Banking Corp. and Mizuho Bank, Ltd., will contribute ¥700 billion; and that other Japanese companies will contribute a total of ¥50 billion.

However, Toshiba is concerned that screenings of the plan by antimonopoly authorities could be prolonged due to a rise in Toshiba Memory’s market share, given that WD, which also produces memory chips, could become involved in Toshiba Memory’s management.
Taking into account Toshiba’s concerns, WD has expressed its intention to buy Toshiba Memory corporate bonds, which can be converted into stocks later, and also refrain from getting involved in the management of the firm. Discussions are under way for WD to contribute ¥150 billion toward the purchase. WD has opposed the sale of Toshiba Memory to third parties and asked the International Court of Arbitration to order a suspension of its sale.

The legal action taken by WD has seriously obstructed negotiations, leading Toshiba to strongly demand WD withdraw its legal action.Technological innovation in the fiercely competitive memory chip industry requires huge investments of about ¥300 billion a year. Toshiba demanded that Toshiba Memory shares be listed sometime in the future so that the subsidiary can secure a stable source of funds.

However, some in Toshiba have voiced caution about whether the consortium will comply with the conditions due to the past dispute with WD.

 

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