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posted by martyb on Friday September 22 2017, @03:17AM   Printer-friendly
from the thanks-for-the-memories dept.

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.

Also at NYT, Engadget, Nasdaq, BBC, and Bloomberg (alt opinion).

Previously: Chaos as Toshiba Tries to Sell Memory Business


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Chaos as Toshiba Tries to Sell Memory Business 15 comments

Some news outlets reported that Western Digital was close to acquiring Toshiba's memory business, but that had not been finalized as of Tuesday:

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.

Toshiba to focus on chip talks with Bain, but doesn't rule out other suitors

Start the Bidding War, Toshiba

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


Original Submission

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  • (Score: -1, Spam) by Anonymous Coward on Friday September 22 2017, @03:18AM (2 children)

    by Anonymous Coward on Friday September 22 2017, @03:18AM (#571542)

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    • (Score: -1, Spam) by Anonymous Coward on Friday September 22 2017, @03:24AM (1 child)

      by Anonymous Coward on Friday September 22 2017, @03:24AM (#571544)

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      • (Score: -1, Spam) by Anonymous Coward on Friday September 22 2017, @03:34AM

        by Anonymous Coward on Friday September 22 2017, @03:34AM (#571545)

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  • (Score: 3, Insightful) by PartTimeZombie on Friday September 22 2017, @03:49AM (10 children)

    by PartTimeZombie (4827) on Friday September 22 2017, @03:49AM (#571548)

    That will be the end of Toshiba's former semiconductor business then.

    Bain will do what the private-equity people do, and suck all the "value" out, then leave someone else holding the baby.

    Not sure if I should care or not really.

    • (Score: 2) by Azuma Hazuki on Friday September 22 2017, @03:55AM (5 children)

      by Azuma Hazuki (5086) on Friday September 22 2017, @03:55AM (#571551) Journal

      My thoughts exactly. Whenever I see a company sold to some vague "holdings" or "capital" outfit, all I can think of is "well, there it goes. This company's been impaled on a spike and now the vultures are going to come suck its blood out as it dies a slow, painful death."

      There ought to be a law against "holdings" companies like this. What do they contribute?

      --
      I am "that girl" your mother warned you about...
      • (Score: 4, Informative) by takyon on Friday September 22 2017, @04:22AM

        by takyon (881) <reversethis-{gro ... s} {ta} {noykat}> on Friday September 22 2017, @04:22AM (#571562) Journal

        What do they contribute?

        Assuming the deal goes through, they helped it fill the money hole caused by that nuclear division writedown. Westinghouse [wikipedia.org] is killing Toshiba.

        --
        [SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
      • (Score: 2) by Whoever on Friday September 22 2017, @05:26AM (3 children)

        by Whoever (4524) on Friday September 22 2017, @05:26AM (#571573) Journal

        Whenever I see a company sold to some vague "holdings" or "capital" outfit,

        You need to follow the news more. Bain Capital is the company through which Mitt Romney made most of his money and is also the owner of Toys R Us, which went bankrupt just this week.

        • (Score: 2, Interesting) by Anonymous Coward on Friday September 22 2017, @06:14AM

          by Anonymous Coward on Friday September 22 2017, @06:14AM (#571577)

          somehow Bain hasn't quite sucked Staples dry, though.

          I worked at a softwate (and services) company bought by Bain. As long as business is profitable, kinda sorta ok. But Bain will get their 8% return out of the companies it buys, one way or another. Of course it's the usual patterns...

          o insurance plans get crappier, copays go up, etc.
          o 401k match % goes down.
          o "core hours" come along, for a previously more flexible workplace in a traffic-challenged city (as opposed to region)
          o coffee secretly changed from Starbucks to Folger's Crystals (but curiously, noone notices...)
          o toilet paper in the workerbee toilets changes to single ply. the bathroom on the executive's floor still has the good stuff though...
          o regional mass transit benefit cancelled. but hey now theres a 'pre-tax transportation/commuter savings account" one can set up...
          o chocolate ration increased from 20 grams to 25 grams (how quickly everyone forgot that last year's ration was 30 grams...

        • (Score: 2) by Azuma Hazuki on Friday September 22 2017, @06:35AM (1 child)

          by Azuma Hazuki (5086) on Friday September 22 2017, @06:35AM (#571582) Journal

          Oh, I know about Romney and Bain, though I didn't know they had...ahem...acquired Toys'r'us. And bankrupted it. These people are starting to act like real-life Montgomery Burns, but not funny.

          --
          I am "that girl" your mother warned you about...
          • (Score: 0) by Anonymous Coward on Friday September 22 2017, @09:50PM

            by Anonymous Coward on Friday September 22 2017, @09:50PM (#571837)

            Montromney Bains?

    • (Score: 5, Interesting) by Whoever on Friday September 22 2017, @04:07AM (3 children)

      by Whoever (4524) on Friday September 22 2017, @04:07AM (#571557) Journal

      1. Buy up a company for a small amount, using debt that the acquirer takes on.
      2. Sell assets, such as patents, factories, offices, etc. with lease back deals.
      3. The acquired company pays a large dividend to the acquirer (this is the "profit" step)
      4. Let the acquired company go bankrupt.

      At this stage, I don't understand why banks lend to facilitate this type of transaction. Do they really make enough money out of some of the deals to balance out the near total losses that the bankruptcies make? Or are the banks really using someone else's money? Do the losses ultimately get dumped onto retail investors somehow?

      • (Score: 1, Insightful) by Anonymous Coward on Friday September 22 2017, @04:11AM

        by Anonymous Coward on Friday September 22 2017, @04:11AM (#571558)

        Employees will feel the loss for sure, through their pension. Dumping the pension liabilities could be motivation enough. That's why US airlines keep going bankrupt.

      • (Score: 0) by Anonymous Coward on Friday September 22 2017, @06:26AM

        by Anonymous Coward on Friday September 22 2017, @06:26AM (#571580)

        operating tax losses that can be carried over (applied) up to 10 years after the fact.

        publicly traded companies have two sets of accounting books... IRS and local tax accounting books and reports - profits minimalizrd.
        SEC (US Stock Exchange Commission) reporting and filings engineered to ensure paper profits maximized, in order to ensure executive stock options can be timed for maximum returns on their stock options...
        or ensure short positions work, if there are unavoidable SEC reporting losses too.

        You think the CFO is going to passively take it in the shorts? He'll clue the board and CEO (and a few of his "friends") what's happening too, so they can effectively minimize losses ir capitalize on the pending bad news...

      • (Score: 3, Interesting) by bootsy on Friday September 22 2017, @02:38PM

        by bootsy (3440) on Friday September 22 2017, @02:38PM (#571651)

        Banks can make money out of this type of deal in a number of ways which due to the way banks are split up by so called "Chinese Walls" means that what is good for one part of the bank may not be necessarily good for another.

        Banks make a ton of money out of mergers and acquisitions in an advisory capacity. They also get to brag about where there are on the M&A rankings.

        Banks make money by making commision out of selling securities related to the deal be it shares, bonds, loans etc.

        Banks make money from the interest on loans. If the rate is high enough you don't actually ever need the money paid back and in the short term you make money as you get the interest and principal. It's only when the default comes later that you claim to be surprised and enter a write-down but even then you can still have made a profit on the deal if the total you have received is greater than the loan plus funding costs for the duration of the loan.

        There may well be a lot of chronyism going and you as an individual may know the firm's staff or want your children to have a job with them.

        You may sell the loan/bond/equity off before the default occurs so in which case you have made a profit.

        You may sell a derivative on the load/bond/equity before the default occurs.

        You may buy a hedge derivative on the load/bond/equity before the default occurs and therefore make a profit on your "short" position.

        What is most frustrating about all of this is that when the system works it can take a small business and really help it grow into something bigger that helps the whole economy without any of the tricks above but these days there seems to be a lot less of this and a lot more of the type of deal in the article.

  • (Score: 0) by Anonymous Coward on Friday September 22 2017, @12:27PM (1 child)

    by Anonymous Coward on Friday September 22 2017, @12:27PM (#571619)

    A company that makes useful chips is going to be bought by a company that specializes in dis-investment.
        (Converting a going concern into cash.)

    There are plenty of companies for which this is the ideal outcome.
    Kind of a harsh way to enforce corporate justice as in responsible for your actions.

    Toshiba is on hard times, but not because they are bad actors.
    They still provide useful things that improve everyday life.
    Dis-investment would be unfortunate for all.
    Hopefully WD's joint development contracts will be able to override Bain's MO and save the useful parts.

    • (Score: 0) by Anonymous Coward on Friday September 22 2017, @03:58PM

      by Anonymous Coward on Friday September 22 2017, @03:58PM (#571681)

      A long time ago the CFO/Controller of a large Mid-western manufacturing firm (the wife of my best drinking buddy) clued my young naive ass into the accounting-management-investor mindset: "The most profitable company is one that's shut down and being liquidated."

      Six months later, said manufacturer was killed and liquidated. Only a building in Cleveland still bears its name.

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