Toshiba, Western Digital reach agreement in principle on chip unit
The two sides intend to have a final deal in place next week.
Under the settlement, Western Digital will drop its arbitration claims that allowed it to block the sale of the chip unit to consortium led by Bain Capital. In exchange, Toshiba would grant Western Digital investment rights in a new advanced memory chip production line that will start next year.
The board of the embattled Japanese conglomerate approved a framework for a settlement on Wednesday, one of the sources said.
The potential for Western Digital – Toshiba’s partner in its main semiconductor plant and jilted suitor in the auction – to block a deal has been seen as the main obstacle to the planned sale of the unit to a Bain Capital-led consortium.
The settlement under discussion calls for Western Digital to drop arbitration claims seeking to stop the sale in exchange for Toshiba allowing it to invest in a new production line for advanced flash memory chips that is slated to start next year, two sources said.
Toshiba was forced to put the unit – the world’s no. 2 producer of NAND chips – on the block to cover billions of dollars in liabilities arising from its now bankrupt U.S. nuclear power unit Westinghouse.
The deal with the Bain-led consortium will, however, see it reinvest in the unit and together with Hoya Corp, a maker of parts for chip devices, Japanese firms will hold more than 50 percent of the business – an important wish of the Japanese government.
As part of the planned settlement, Toshiba and Western Digital would extend existing agreements for their chip joint ventures in Yokkaichi, central Japan, one of the sources said. The current agreements are set to start expiring from 2021.
Western Digital, one of world’s leading makers of hard disk drives, paid some $16 billion last year to acquire SanDisk, Toshiba’s chip joint venture partner since 2000.
With data storage key to most next-generation technologies from artificial intelligence and autonomous driving to the Internet of Things, NAND chips have only grown in importance and Western Digital has been desperate to keep the business out of the hands of rival chipmakers.
WDC closed at $78.35.
To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.