Toshiba selects Japan-backed consortium as preferred chip unit bidder

Toshiba announced the name of its preferred bidder for the sale of its Toshiba Memory unit. I will refer to earlier stories for background info but the main gist is that a couple of financial disasters have forced the company to sell it's profitable chip unit as it needs cash to clean up billion dollar holes in its balance sheet.

The Japanese conglomerate says its preference goes to a consortium consisting of Innovation Network Corporation of Japan (INCJ), Bain Capital, the Development Bank of Japan and SK Hynix. Toshiba explains the consortium, which is led by the Japanese government, offers the best overall terms for all stakeholders. Toshiba revealed the deal is valued around 2 trillion yen ($18 billion) and is expected to close in March 2018.

Toshiba Corporation (TOKYO 6502) hereby announces that its board of directors today resolved to select the consortium of Innovation Network Corporation of Japan, Bain Capital Private Equity L P, and Development Bank of Japan (“ the Consortium”) a preferred bidder in respect of the sale of Toshiba Memory Corporation ( “TMC ”).

TMC was split from Toshiba Corporation on April 1, 2017, as a wholly owned subsidiary responsible for Toshiba’s memory business . This was done toward securing further management resources essential for the continued growth of the memory business, and to support Toshiba in enhancing its financial structure.

Toshiba has determined that the Consortium has presented the best proposal, not only in terms of valuation, but also in respect to certainty of closing, retention of employees, and maintenance of sensitive technology within Japan.

Following this decision, Toshiba’s intention is to reach a mutually satisfactory definitive agreement with the Consortium by the date of its annual ordinary general meeting of shareholders, scheduled for June 28, and to close the transaction within March 2018, upon clearance of all the required processes, including competition law approvals in key jurisdictions

One party that will be severely displeased is joint-venture partner Western Digital, they're currently taking legal action against Toshiba to block the sale of the semiconductor unit to a third party. Earlier this month it was reported that WD upped its bid to 2 trillion yen or more, while a partnership between Broadcom and private equity firm Silver Lake reportedly offered 2.2 trillion yen.

Western Digital offers the following statement and points out they're looking forward to the hearing for injunctive relief, which is scheduled for July 14:

Western Digital Corp. (NASDAQ: WDC) today issued the following statement regarding Toshiba Corporation’s selection of a consortium led by Korea-based SK Hynix Inc. and Bain Capital Japan, with funding provided by Japanese government funds Innovation Network Corporation of Japan and Development Bank of Japan Inc., as the preferred bidder regarding the sale of Toshiba’s interests in three NAND flash-memory joint ventures operated with Western Digital’s SanDisk subsidiaries (“Flash JVs”):

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. 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.

On June 15, 2017, Western Digital’s SanDisk subsidiaries filed a request for injunctive relief seeking to prevent Toshiba Corporation from transferring its JV interests until the request of the subsidiaries for injunctive relief in arbitration is decided by the arbitral tribunal. The arbitration filed on May 14, 2017, with the ICC International Court of Arbitration continues to move forward in parallel.

We remain confident in our consent rights and our legal position and look forward to the hearing for injunctive relief, which is scheduled for July 14, 2017.