Toshiba ends tug of war between bidding groups for memory chip unit

Isaac Cain
September 21, 2017

U.S. firm Bain Capital's acquisition is backed by a consortium of domestic and foreign investors, most notably Apple, Seagate and Dell, which will both provide financial support, as well as Toshiba itself, which will reinvest 350.5 billion yen into the new company.

Japanese conglomerate Toshiba has reportedly made a decision to sell its memory-chip business to a bidding group which includes South Korean chipmaker SK Hynix and USA investment bank Bain Capital.

Reuters reported that under the proposed transaction, Bain and SK Hynix also have brought in us tech firms Apple and Dell, high-volume buyers of Toshiba chips, to help support the offer.

Toshiba needed to wrap up the deal quickly to avoid its liabilities exceeding its assets for two straight years and being automatically delisted from the Tokyo Stock Exchange (TSE).

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The move came after Toshiba and Western Digital failed at the last minute to agree on terms of the acquisition deal.

The Bain consortium has since revised the offer, aiming to get around that problem by inviting the state-backed investors - the Innovation Network Corp of Japan (INCJ) and the Development Bank of Japan - to invest in the business only after any arbitration with Western Digital is settled. In that case, three joint ventures between Toshiba and Western Digital would not be transferred to Bain at closing and the purchase price would be adjusted, the person said.

The auction has gone through dizzying twists and turns. The Bain deal doesn't give Apple direct control over Toshiba's memory production, but it does put the company in a strong position when it comes time to buy more chips for its products. The people declined to be identified as they were not authorized to speak on the matter. The US buyout firm sought more financial support from Apple, asking for about $7 billion in capital, up from a previous agreement for about $3 billion, said a person familiar with the matter. Yet, it is still not clear how much Apple will contribute to the agreement.

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