Toshiba agrees to sell memory unit to Bain-led consortium for $18 bn

Troubled Japanese conglomerate Toshiba Corporation has agreed to sell its prized memory chips business to a consortium led by Bain Capital Private Equity, in a deal worth about 2 trillion yen ($18 billion).

Toshiba said its board of directors at its meeting on Wednesday decided to sell the entre shareholding in Toshiba Memory Corporation (TMC), a wholly-owned subsidiary of Toshiba, to KK Pangea (Pangea), a special purpose vehicle formed by Bain Capital -led consortium and to enter into a share purchase agreement with Pangea. 

The deal could potentially help Toshiba, the world's second-largest producer of NAND memory chips, plug a hole left in its finances following the bankruptcy of US nuclear unit Westinghouse and perhaps save Toshiba from being delisted on the Tokyo Stock Exchange.

While the sale has been agreed to, South Korea's SK Hynix Inc, a partner in the winning consortium, said talks were still ongoing while some sources familiar with the matter confirmed consortium members were still wrangling over details of their agreement. They are also yet to sign individual commitment letters that are needed before the sale could be signed formally.

''There are some key issues still to be agreed upon in the content approved by Toshiba's board,'' the South Korean chipmaker said in a statement, adding that it would continue talks.

As per the agreement, Toshiba will invest 350.5 billion yen in Pangea and will also be entitled to related financial benefits such as dividends. Prior to transfer of TMC's stock Pangea, Bain capital, Japanese and non-Japanese companies and Toshiba plans to invest in Pangea to acquire its common stock, convertible preference stock and non-convertible preference stock.

In addition, Pangea has plans to secure loans from financial institutions and banks.

The Bain-led consortium comprises Toshiba, Japan's Hoya Corp, South Korean chipmaker SK Hynix, US buyers of Toshiba chips Apple and Dell, memory product maker Kingston Technology and data storage firm Seagate Technology.

Meanwhile, reports said the jilted suitor and Toshiba joint venture partner Western Digital (WDC) took fresh legal action overnight, filing new arbitration requests to stop Toshiba investing in a new flash memory production line without its help.

This and other unknowns, including the outcome of antitrust investigations, however, tend to make the outcome unclear.

It is also not clear how long that process could last, and what impact it would have on the completion of the sale.

Analysts, meanwhile, said SK Hynix's participation could prolong antitrust reviews, particularly in China, as Beijing is trying to grow domestic players.

The NAND flash memory chips business already faces fierce price competition from Samsung Electronics and Western Digital and China is looking to grow its own brands.

Toshiba said besides the Bain-led group, it had been negotiating with two other potential groups to sell its memory business, including one consisting Western Digital and another that involved iPhone assembler Hon Hai Precision Industry.