Published: Wed, August 30, 2017
Hi-Tech | By Grace Becker

WD, Toshiba Deal Finalizes This Week

WD, Toshiba Deal Finalizes This Week

Reuters reports that Toshiba (OTCPK:TOSBF, OTCPK:TOSYY) might not finalize the chip unit sale by its own August 31 deadline.

Toshiba President Satoshi Tsunakawa and Western Digital Chief Executive Officer Steve Milligan held talks Monday and reached a broad agreement on the sale of Toshiba Memory.

Toshiba has been trying to flog off its flash memory unit to cover losses from its bankrupt U.S. nuclear business Westinghouse but any deal it managed to set up were scuppered by Western Digital, which is Tosh's partner in the business.

The new consortium will include Western Digital, Toshiba and the government-backed Innovation Network of Japan.

Toshiba's NAND chips production is considered to be the second largest in the world and it would help cover billions worth of losses on their last venture in the nuclear business called Westinghouse.

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While Western Digital is very much in the driver's seat in talks, it has made several key concessions to secure a deal that Toshiba is willing to accept and that will keep the unit out of the hands of rival chip firms, sources have said.

Western Digital is likely to invest 150 billion yen in convertible bonds, about 16 percent of the voting rights when all bonds are converted to ordinary shares, and its stake will be limited to a third of voting rights.

The consortium with Western Digital also includes US private equity firm KKR & Co (KKR.N) as well as the state-backed Innovation Network Corp of Japan and Development Bank of Japan, all of which will offer 300 billion yen each for the chip business, the people said on Thursday. This could result in a delisting from the Tokyo Stock Exchange.

Some media reported on Tuesday that SK Hynix is seeking to file legal action against Toshiba for shifting its preferred bidder to the Western Digital-led consortium, but the Korean chipmaker denied the speculation, saying selection of a preferred bidder was "not legally binding".

Given regulatory approvals could take more than six months, Toshiba has been hoping to reach a deal by the end of the month to ensure it can close the sale in time. According to rumors and news, the Toshiba Corp has agreed to WD's offer if $17.4 billion for the entirety of the company's chip manufacturing business.

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