Western Digital Seeks To Intervene In Toshiba's Sale Of Memory Business
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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. Toshiba has been suffering financially due to crippling losses incurred by its nuclear power division, and to offset those losses Toshiba has been working to sell off its memory business. Toshiba's memory business is one of the most successful parts of the company and the Toshiba-SanDisk flash memory joint venture is one of the four major manufacturers of NAND flash memory.
When Toshiba announced in March their intentions to raise cash by selling a stake in their memory business, a bidding war emerged. Western Digital, Micron and SK Hynix all sought to expand their share of the NAND flash market, but Toshiba was reluctant to sell to a competitor, hoping to avoid a prolonged anti-trust regulatory approval process. The Japanese government also does not want to see the NAND flash business sold to a Chinese-controlled company. This left private equity firms as the bidders Toshiba was most receptive to, but other technology companies like Broadcom and Foxconn are bidding.
After failing to meet their goal of selling a 20% stake by the end of March, and as revised estimates made it clear that 20% would not cover Toshiba's nuclear losses, Toshiba's plans shifted toward a complete spin-off and sale of their Toshiba Memory division. As of February, Toshiba valued this unit at around $18B. In late March it was reported that Broadcom and Silver Lake Partners had jointly bid to buy Toshiba Memory for about that amount, then in early April Foxconn reportedly offered $27B. Broadcom has since increased their bid to $28B. SK Hynix and Bain Capital are reported to be jointly bidding up to $13.5B for a majority stake in Toshiba Memory.
The bids for Toshiba Memory have reached prices that are difficult but not necessarily impossible for Western Digital to match. Western Digital would need to fund an acquisition with significant debt, and other analysts have speculated that it may be better for Western Digital to pursue acquiring a majority stake in Toshiba Memory rather than a complete acquisition.
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 reve
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