Toshiba sells flash memory unit to Bain Capital group for 2 trillion yen

Toshiba officially announced it signed a deal to sell its lucrative flash memory chip unit to a consortium headed by private equity firm Bain Capital. The Japanese conglomerate needs to sell the unit to fix gaping holes in its balance sheet caused by misfortunes in other units.

It was a long and rocky eight-month bidding process and the path ahead remains cloudy as Western Digital will fight the sale in court. The deal is valued at 2 trillion yen ($18 billion) and includes various Japanese and foreign companies, including Apple, Dell, SK Hynix, Hoya, Kingston, and Seagate.

Details about how the deal is structured can be read at Bloomberg:

Toshiba’s board agreed to the Bain proposal at a meeting Wednesday. Under the agreement, Bain, Toshiba, SK Hynix and Japan’s Hoya will pay about 960 billion yen for common and convertible stock, while Apple, Dell, Kingston Technology Co. and Seagate Technology Plc will spend about 440 billion yen for convertible and non-convertible preferred stock, a person familiar with the matter said. The special purpose entity making the acquisition will be called Pangea and receive about 600 billion yen in loans, the person said.

Western Digital responded by filing an additional request for arbitration with the ICC International Court of Arbitration. The storage firm claims Toshiba's action to spin off and sell its memory unit violates the joint-venture agreement it has with WD's SanDisk unit. WD seeks a permanent injunction preventing Toshiba from making unilateral investments in manufacturing equipment for Fab 6 without first giving SanDisk the opportunity to make a comparable investment. Toshiba announced last month that it would unilaterally purchase all the manufacturing equipment for the Fab 6 clean room at the joint-venture operations in Yokkaichi, Japan, a move that would exclude WD from any rights to output from the new fab.

An anonymous source told Bloomberg that if the dispute with Western Digital isn't resolved at closing, the joint ventures between Toshiba and WD will not be transferred to Bain. This will result in a downward adjustment of the purchase price. The joint ventures are reportedly worth less than 5 percent of Toshiba Memory.