Toshiba picks memory bidder, WD cries foul

June 22, 2017 // 1:30 p.m.

Tags: #acquisition #financial #joint-venture #memory #micron #sandisk #sk-hynix #toshiba #toshiba-memory-corporation #wd #western-digital

Toshiba has announced that it has picked a winning bid for the sale of its memory division, but joint venture partner Western Digital is still seeking an injunction to block the sale.

Following catastrophic financial losses after an attempt to break into the US nuclear power market, Toshiba announced plans to spin off its memory division, including solid-state storage but excluding imaging sensors, with Western Digital tipped as the favourite. Seeking an 'injection of third-party capital,' Toshiba's plan would see the memory arm spun off into an independent company with a third party taking partial ownership.

Western Digital's never-confirmed position as the front-running bidder in the deal was threatened, however, when SK Hynix and Micron were named among the competing bidders. By mid-May, Western Digital began threatening to block the sale of 20 percent of the resulting company for £1.4 billion to £2.12 billion with the claim that the joint venture agreement between subsidiary SanDisk, acquired in 2015, and Toshiba gave it a contractual right 'prohibiting transfers without the consent of the other party.'

Now, Toshiba has announced the winning bid for its newly-formed Toshiba Memory Corporation: a triumvirate formed of the Innovation Network Corporation of Japan, Bain Capital Private Equity LP, and the Development Bank of Japan - and Western Digital isn't happy. 'Toshiba has determined that the Consortium has presented the best proposal,' the company's announcement to investors and press claims, '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 Corporation continues to ignore both SanDisk's consent rights and the dual-track legal process currently underway. The language of the relevant agreements is clear: Toshiba Corporation has no right to transfer its JV interests to a third party without SanDisk's consent,' Western Digital reiterated in a statement following the news its bid was unsuccessful. 'SanDisk has not given its consent to any transaction, and will continue to protect its JV interests and preserve its rights through both its request for injunctive relief and the arbitration process.

'We note that Toshiba has acknowledged and validated SanDisk's consent rights on multiple occasions. Furthermore, certain parties identified in Toshiba's announcement have previously been notified by Western Digital that it considers any effort to aid Toshiba’s breach of its contractual obligations to SanDisk, including any agreement to directly or indirectly transfer any portion of the joint venture, as tortious interference with contract.'

Toshiba has not publicly responded to Western Digital's claims, which are due to be heard in court on July 14th.


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