Toshiba, Western Digital reach agreement, drop litigation

Faith Castro
December 14, 2017

Toshiba and Western Digital announced the end to a months-long legal spat that had threatened to derail the $18 billion sale of Toshiba's flash-memory business and cut the USA company off from a future supply of vital new products.

The agreement now struck between TMC, Toshiba, and Western Digital will see all pending litigation and arbitration actions withdrawn; in addition, TMC and Western Digital have agreed to jointly invest in a new memory fabrication facility in Yokkaichi, followed by a flash wafer fabrication facility in Iwate.

The Western Digital-Toshiba settlement extends the companies' NAND joint venture investments to December 31, 2027 and beyond. It may have to clear further hurdles, such as possible anti-trust concerns.

Western Digital managed to gain major concessions through its hard bargaining, but the lucrative nature of the partnership apparently brought the company to the negotiating table.

Toshiba and Western Digital said Wednesday that they had agreed to withdraw a cluster of lawsuits and arbitration claims over the deal that they had filed against each other.

However, it seems Western Digital has finally backed down, reaching an out-of-court settlement with Toshiba that will allow the sale to Bain Capital to go ahead.

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It continued: "Fab 6 will be entirely devoted to the mass production of BiCS Flash, the next-generation of 3D flash memory, starting next year".

Toshiba was under heavy pressure to sell the chip unit in order to cover massive losses from its nuclear division and avoid having its stock delisted from Japan's stock exchanges. Toshiba is seeking to sell its profitable flash-memory unit as part of an effort to avoid having its stock delisted in Japan due to struggles at its USA nuclear subsidiary, Westinghouse.

Western Digital's strategy "has been to establish a comprehensive platform that extends across technologies, products and markets", said Milligan. The deal is structured so that Toshiba and Hoya Corp. will hold a majority of the voting stock, a solution that keeps control of sensitive technology in Japanese hands.

Neither Toshiba nor Bain took part in the conference call with Western Digital executives, but both released statements confirming the agreement.

Toshiba raised 600 billion yen, or around $5.3 billion, in short-term funding to sustain it in case the sale to Bain was delayed.

In return, Western Digital does at least get to stay in the flash memory business. It is supposed to be completed in March, though antitrust regulators in several countries must still give approval.

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