Western Digital seeks international arbitration to halt sale of Toshiba chips arm
15 May 2017
Western Digital Corp has sought international arbitration to block Toshiba Corp from selling its chips arm without its consent, a move that could jeopardise a much-needed capital injection for the Japanese conglomerate.
Although the two companies jointly operated Toshiba's main semiconductor plant, Western Digital was not a favoured bidder for the world's second biggest NAND chip producer, having bid much lower than other suitors, a source with knowledge of the matter said, Reuters reported.
A legal battle could delay or abort the auction aims to raise around $18 billion, for which private equity firm KKR & Co, Taiwan's Foxconn and US chipmaker Broadcom were bidding.
The Japanese conglomerate was looking to the sale to bring in billions in dollars to make up for cost overruns at its now bankrupt US nuclear unit Westinghouse. According to commentators, the dispute could also render its Tokyo Stock Exchange listing vulnerable as fresh funds were urgently needed to shore up its balance sheet.
According to its unaudited earnings release, Monday the company ended the year with a ¥950-billion ($8.39 billion), net loss, and negative shareholder equity worth ¥540 billion.
Meanwhile, Western Digital said today that it had initiated arbitration procedures with the International Chamber of Commerce. It had demanded that Toshiba roll back plans to put its joint venture assets into a hived out entity - Toshiba Memory, and in addition, halt an all-out sale without consent from Western Digital unit SanDisk.
According to Toshiba, while it had not been notified of any arbitration, there had been no breach of contract and Western Digital had no grounds to interfere with the sale process.
But the setback did not deter investors who pushed up Toshiba shares 4.2 per cent over news that progress was being made towards capping some of its nuclear liabilities in the US.