Western Digital to win Toshiba chip unit bidding war

Gladys Abbott
September 13, 2017

NKG claims Toshiba will decide in favour of the ¥2 trillion ($18.2bn) bid on September 13 and sign a formal contract following a Toshiba board meeting on September 20. -South Korean consortium it had initially picked as its favored bidder.

Western Digital gained a stake in the Toshiba unit as a result of its $15.8 billion SanDisk acquisition. Stifel Nicolaus reaffirmed a buy rating and issued a $120.00 price objective (up previously from $105.00) on shares of Western Digital Corporation in a report on Saturday, April 29th.

It comes after a rival group led by Western Digital appeared to have taken pole position in the race to acquire the highly rated company.

SK Hynix is providing finance, but it is possible that this could be turned into a share stake at a later date, after the deal is approved by the Japanese government. Toshiba has to raise at least $18 billion from the sale so it can escape negative shareholder equity and cover the billions of dollars in liabilities incurred by US nuclear subsidiary Westinghouse. It has filed an increased bid of around ¥2.4 trillion ($22.3bn), compared with an original bid of about ¥1.9 trillion on the table from Western Digital. Toshiba had been concentrating on settling negotiations with Western Digital by tomorrow, allowing it to meet the deadline imposed by its banks.

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The Toshiba unit would boost Western Digital's access to a large and growing category of memory chips called NAND flash and also prevent a "significantly worse scenario" of the unit going to competitors, Daryanani wrote.

According to Reuters, the Bain bid would give the private equity firm 49.9 per cent of initial voting rights in the business, while Toshiba would retain a 40 per cent stake.

However, if Western Digital remains a minority investor in the business, Apple, a top customer for Toshiba chips, is offering about 50 billion yen ($460 million) to a group including the United States firm to help finance a bid, one source said. After months of negotiations, legal battles and boardroom meetings, Toshiba has picked the USA company, according to Japanese news outlet Nikkan Kogyo.

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