Toshiba board fails to clear Western Digital proposal for joint bid with Apple
06 September 2017
Toshiba Corp's board, which met today to review a revised bid proposal by its US partner Western Digital, failed to reach a decision on the proposal, further delaying the sale of its prized memory chip unit, reports quoting sources close to the development said.
Toshiba's stake sale plan, which has been hit by Western Digital's legal challenge and claims of first right of refusal from the very beginning, has seen several twists and turns with bidders grouping and regrouping with revised offers.
Western Digital Corp is reported to have now offered to partner Apple Inc to bid for Toshiba Corp's chip unit, in an apparent effort to retain US control while also raising enough cash for the purchase, according to Japanese media reports.
Western Digital, which has been at loggerheads with Toshiba, is reported to have offered to drop out of the bid it is organising to get a deal firmed up, but on condition that it would get more favourable terms in the business post sale and that no other rival chipmaker would be part of the consortium bidding for the Toshiba unit.
The Western Digital group could offer more than Toshiba's •2 trillion ($18 billion) asking price for Toshiba Memory Corp, the Japan Times reported quoting industry sources.
Western Digital, a key member of the consortium, has proposed a reduction in its share of investment in an effort to speed up antitrust screenings in Japan and abroad, and it could even decide to make no investment, sources have said.
In return, Western Digital is demanding that it continue to play a key role in the chip plant it jointly operates with Toshiba in Mie Prefecture.
Western Digital is also asking Toshiba to review their joint venture terms in a way that better benefits the US firm, including increasing the proportion of flash memory chips it can receive.
Toshiba boars is also expected to consider competing bids from a Japan-US-South Korea consortium and another by Taiwanese tech giant Hon Hai Precision Industry Co, as Toshiba is wary over Western Digital's attempt to seek management rights in the chip unit in the future.
Since flash memory chips are used as a storage medium in smartphones and are considered as a core component by Apple, Western Digital hopes to gain both business and customer in one stroke by joining hands with Apple for the bidding.
Last week, the Japan-US-South Korean group, which Toshiba had initially picked as its preferred bidder, made a last-minute had bid for the chip unit together with Apple.
The core members of the Western Digital group include the government-backed Innovation Network Corp of Japan, the Development Bank of Japan and US fund Kohlberg Kravis Roberts & Co.
The Western Digital group had initially offered to buy Toshiba Memory for a total of •1.9 trillion to •2 trillion, including •150 billion worth of bonds that are convertible into common shares.
The Japanese conglomerate is rushing to finalise the sale in order to raise funds to cover billions of liabilities at its bankrupt US nuclear unit, Westinghouse, and without an agreement in the next few weeks, Toshiba faces delisting from bourses.
Westinghouse's losses have plunged the Japanese conglomerate into negative net worth, a situation it must fix by next March to avoid a forced delisting from the Tokyo Stock Exchange.
Toshiba today also said it planned to build a new production site for Toshiba Memory in Kitakami, Iwate Prefecture, in addition to its existing plant in Yokkaichi, Mie Prefecture.
Toshiba aims to start building new fabrication plants in Kitakami in 2018 and start operations in 2020.