from the chipped-away dept.
Toshiba Corp now favors a group led by Bain Capital LP and SK Hynix Inc to buy its prized semiconductor business, as it failed to bridge key gaps with its business partner and rival bidder Western Digital Corp, two people briefed on the matter said on Tuesday.
The dramatic twist in the sale process, beset by legal wrangling and revised bids, comes just a day before Toshiba's latest deadline. The Japanese conglomerate, which needs to sell the chip business to plug a huge hole in its finances, had been trying to seal a deal by Wednesday with the Western Digital group but now hopes to reach agreement with the Bain group by next week, said the sources, who declined to be identified as the talks were private.
A Toshiba spokesman said the firm could not comment on details of the talks. The parties have already missed two deadlines by Toshiba's banks, which want a deal to pump $18 billion or more into the company to pull it out of negative shareholder equity and prevent it from being delisted. Yoshimitsu Kobayashi, an external Toshiba director, told reporters earlier on Tuesday that although the deadline is important, it is also important that negotiations head in a good direction.
Apple, a buyer of Toshiba's NAND chips, reportedly threatened Western Digital with a boycott of its products if it took complete control of Toshiba's memory business. But it did offer $460 million in acquisition financing for a group including WD as long as WD remained a minority investor.
Update: Toshiba says it favors a bid from a group led by Bain Capital, but is still open to better offers.
Previously: Broadcom and Japanese Government Considering Bid for Toshiba's Semiconductor Unit
Samsung Could Boost NAND Production Capacity, WD Intervenes in Toshiba Memory Sale
Toshiba Sues Western Digital as it Seeks to Sell its Memory Business to a Third Party
A joint bid by the U.S. company Broadcom Limited and the Japanese government may keep Toshiba's chip business out of the hands of China or South Korea:
A Japanese government-backed fund and policy bank are considering a joint bid with Broadcom Ltd for Toshiba Corp's semiconductor business, a move that would vault the U.S. chipmaker into the lead to buy the prized unit, the Asahi newspaper said on Wednesday.
A bid by Innovation Network Corp of Japan and the Development Bank of Japan with Broadcom would appear to be aimed at preventing Toshiba's chip technology from going to rivals in China or South Korea, the Asahi said, citing an unidentified source.
INCJ Chairman Toshiyuki Shiga said on Tuesday the fund was looking at the chip auction although it had not participated in the first round of bidding. People familiar with the matter have told Reuters INCJ might invest in the business as a minority partner - a move that would help the government prevent a sale to bidders it deems risky to national security.
Previously: Toshiba and SanDisk Announce 48-Layer 256 Gb 3D NAND
Toshiba in Trouble
Toshiba Teasing QLC 3D NAND and TSV for More Layers
Toshiba Envisions a 100 TB QLC SSD in the "Near Future"
Toshiba Considers NAND Business Split; Samsung Delays Release of 4 TB SSDs (WD is a bidder)
SK Hynix to Bid for Toshiba's Memory Business
Toshiba Nuked Half its Assets
Huge Nuclear Cost Overruns Push Toshiba's Westinghouse Into Bankruptcy
Toshiba Warns That its Survival is at Risk
Tech giant Samsung Electronics Co Ltd said on Monday it is considering adding NAND memory chip production capacity at its manufacturing base in China amid an industry-wide boom that will likely fuel record sales for memory suppliers.
Samsung, the world's biggest memory chip maker by sales, has already invested $7 billion in the Xi'an facility to make 3D NAND memory chips. The chips are used for high-end data storage products on electronic devices such as smartphones, personal computers and data servers, and their prices have surged in recent months as suppliers struggle to keep up with demand.
[...] Researcher IHS expects this year's memory industry revenue to jump 32 percent to a record $104 billion.
Recently, Western Digital sought to intervene in the sale of Toshiba's memory business, rather than purchase the division itself. Originally valued at $18 billion, Foxconn has bid $27 billion and Broadcom bid $28 billion.
Western Digital, through its SanDisk subsidiary, is seeking arbitration to prevent Toshiba from selling off its stake in their flash memory joint venture without the consent of Western Digital. [...] Western Digital does have leverage in their preexisting relationship with Toshiba as co-owner of their flash memory joint venture. Western Digital is alleging that Toshiba is required to obtain Western Digital's consent before spinning off or selling Toshiba Memory, and that Toshiba's actions so far have violated their agreements with Western Digital. Western Digital has initiated arbitration proceedings against Toshiba, seeking to block further action without Western Digital's consent and to reverse the Toshiba Memory spin-off.
Toshiba wants to sell off its memory business, but not to Western Digital (just yet):
Toshiba was hoping to complete a deal with the winning bidder at a shareholder meeting yesterday. In the weeks leading up to that meeting, Toshiba had to issue several reminders of how desperate their financial state is: disclosing new legal actions against them by investors seeking damages pertaining to Toshiba's accounting scandals, announcing that the Tokyo and Nagoya stock exchanges are moving toward delisting Toshiba, and revising their outlook for fiscal year 2016 to reflect a negative shareholder equity of (¥581.6B). Meanwhile, Western Digital reiterated their objection to Toshiba selling the memory business to a third party and warned several third parties that they would view participation in the sale as tortious interference. Most recently, Western Digital also reportedly resubmitted its bid for Toshiba's memory business with an offer around ¥2 trillion, close to the amount offered by the consortium Toshiba had previously selected as the preferred bidder. Toshiba for their part has made no mention of Western Digital's offer.
In the aftermath of yesterday's shareholder meeting, Toshiba made several announcements. As expected, Toshiba was not able to finalize a sale of the Toshiba Memory Corporation subsidiary they have consolidated the memory-related assets under, but they are continuing to negotiate with the consortium. Toshiba announced plans for further investment in the joint venture's Fab 6 in Yokkaichi, Japan, and questioned whether SanDisk would jointly invest in the 3D NAND fab. Toshiba also announced that it has filed a lawsuit in the Tokyo District Court against Western Digital alleging unfair competition and seeking an injunction and damages. Toshiba claims that Western Digital is exaggerating their consent rights and also alleges that Western Digital has improperly obtained Toshiba trade secrets by transferring some employees from SanDisk to Western Digital whom have access to Toshiba confidential information through the joint ventures.
Western Digital Announces 96-Layer 3D NAND, Including Both TLC and QLC
Toshiba Considers NAND Business Split; Samsung Delays Release of 4 TB SSDs
Broadcom and Japanese Government Considering Bid for Toshiba's Semiconductor Unit
Samsung Could Boost NAND Production Capacity, WD Intervenes in Toshiba Memory Sale
Western Digital has apparently been spurned as Toshiba has agreed to sell its semiconductor business to Bain Capital instead for around $18 billion. The deal has not been finalized so more confusion could be over the horizon:
Japan's Toshiba Corp agreed on Wednesday to sell its prized semiconductor business to a group led by U.S. private equity firm Bain Capital LP, a key step in keeping the struggling Japanese conglomerate listed on the Tokyo exchange. In a last-minute twist to a long and highly contentious auction, Toshiba said in a late-night announcement through the exchange it agreed to sign a contract for the deal worth about 2 trillion yen (13.22 billion pounds).
The decision to sell the world's No. 2 producer of NAND memory chips, first reported by Reuters, was made at a board meeting earlier on Wednesday. Late on Tuesday, sources had said Toshiba was leaning towards selling the business to its U.S. joint venture partner Western Digital Corp. It's unclear whether the sale to the Bain Capital-led group will proceed smoothly, as Western Digital has previously initiated legal action against Toshiba, arguing that no deal can be done without its consent due to its position as Toshiba's joint venture chip partner.
Previously: Chaos as Toshiba Tries to Sell Memory Business
The explosive growth in the NAND flash market may be slowing down:
After a blistering year-and-a-half long surge, a sudden drop in some memory prices, followed by Samsung Electronics Co's disappointing profit estimate, is causing jitters among investors who had bet the chip boom would last at least another year.
Amid news that the market has started losing some steam - prices of high-end flash memory chips, which are widely used in smartphones, dropped nearly 5 percent in the fourth quarter - some analysts now expect the industry's growth rate will fall by more than half this year to 30 percent.
That led shares in Samsung to dip 7.5 percent last week, while its home rival SK Hynix fell 6.2 percent. But analysts say that there is unlikely to be a sudden crash, and that 2018 should be a relatively stable year for chipmakers.
The $122 billion memory chip industry has enjoyed an unprecedented boom since mid-2016, expanding nearly 70 percent in 2017 alone thanks to robust growth of smartphones and cloud services that require more powerful chips that can store more data.
Previously: Samsung Set to Outpace Intel in Semiconductor Revenues
Chaos as Toshiba Tries to Sell Memory Business
IC Insights Predicts Additional 40% Increase in DRAM Prices
Expect 20-30% Cheaper NAND in Late 2018