Toshiba announces sale MOU with Bain Capital, SK Hynix

September 13, 2017 // 10:34 a.m.

Tags: #dr-yasuo-naruke #finance #financial #joint-venture #memory #sale #sandisk #semiconductor #shares #toshiba #toshiba-memory-corporation #western-digital

Toshiba has announced the signing of a memorandum of understanding (MOU) which would see the company's semiconductor business Toshiba Memory Corporation (TMC) sold to a consortium led by Bain Capital and including memory giant SK Hynix - and Western Digital, unsurprisingly, is unimpressed at the news.

Toshiba's plan to spin-off the bulk of its semiconductor operations - bar its image sensor business - was announced earlier this year following financial troubles including an accounting scandal which saw an exodus of top executives and a $35.9 million fine plus a disastrous entry into the US nuclear power market. The spin-off, Toshiba explained, would still be partly Toshiba-owned but with 'an injection of third-party capital as a financial measure,' later clarified by the company as a sale of around 30 percent of the spin-off Toshiba Memory Corporation (TMC).

Things have not been going smoothly since then, however: Following rumours that the company was interested in bidding, Western Digital sought to block any sale of the spin-off under what it claimed was a right of first refusal granted to it through its acquisition of SanDisk which had entered into a joint venture with Toshiba on flash storage and related technologies. As Toshiba proceeded with the sale, Western Digital became increasingly irate and eventually the two companies took to the courts in a move which caused Toshiba to miss its originally-scheduled deadline for the deal.

Toshiba is now claiming that the sale is proceeding, having signed a memorandum of understanding (MOU) which would see a consortium led by Bain Capital Private Equity LP and including memory giant SK Hynix acquire the shares of Toshiba Memory Corporation. 'Toshiba intends to reach a definitive agreement that fully meets our objectives at the earliest possible date,' said Dr. Yasuo Naruke, senior executive vice president of Toshiba, during the announcement. 'The sale of TMC must promote further growth of TMC’s memory business, and return Toshiba group to positive equity.

'The memory business is highly time sensitive. It requires timely investments, accelerated product development, and the ability to quickly ramp-up large-scale production capacity,' Dr. Naruke added. 'TMC is now proceeding with a unilateral investment in manufacturing equipment for the Fab 6 clean room at its Yokkaichi Operations, and we aim to increase the output of 3D Flash memory at Yokkaichi to approximately 90 percent of capacity in FY2018. Moving forward, we will continue to make timely investments to expand operations to meet growing market demand.'

Western Digital, meanwhile, is seething over the announcement - despite Toshiba describing the MOU as non-binding, meaning it has the right to continue to negotiate with other bidders but from the strong position of having an existing deal all but sewn up with Bain Capital. 'We are disappointed that Toshiba would take this action despite Western Digital's tireless efforts to reach a resolution that is in the best interests of all stakeholders,' a Western Digital spokesperson claimed following Toshiba's announcement. 'Throughout our ongoing dialogue with Toshiba, we have been flexible, constructive and have submitted numerous proposals to specifically address Toshiba’s stated concerns. Our goal has been — and remains — to reach a mutually beneficial outcome that satisfies the needs of Toshiba and its stakeholders, and most importantly, ensures the longevity and continued success of the JVs.

'Furthermore, it is surprising that Toshiba would continue to pursue a transaction with a consortium led by Korea-based SK Hynix Inc. and Bain Capital Japan without SanDisk's consent, as the language in the relevant JV agreements is unambiguous, and multiple courts have ruled in favour of protecting SanDisk's contractual rights. We remain confident in our ability to protect our JV interests and consent rights.'

Western Digital's arbitration proceedings relating to the sale continue.


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