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Published: Thu, June 29, 2017
Economy | By Melissa Porter

Toshiba says chip unit pact delayed as talks with preferred bidder ongoing

Toshiba says chip unit pact delayed as talks with preferred bidder ongoing

Toshiba Corp. may miss a deadline for sealing a deal with a Japan-U.S.

Shares in Toshiba were down 0.73 percent at 296 yen in early trade after the Nikkei report.

Western Digital inherited a manufacturing and information sharing partnership between memory maker SanDisk and Toshiba when it bought out the former for $16 billion previous year.

Toshiba said recently it was facing a possible 712.5- billion-yen writedown on its failing nuclear energy business and a related group net loss of more than 1 trillion yen.

Western Digital is particularly concerned that Toshiba's preferred bidding consortium includes rival chip maker SK Hynix Inc. "It is taking time to smooth out differences in opinion among members of the consortium", he explained in an interview with Reuters.

The Japanese giant had hoped to complete the sale to the group of South Korean, US and Japanese investors in a deal worth around £14bn by the time of its AGM.

The U.S. court hearing for its injunction request is scheduled for July 14.

Toshiba originally announced that it meant to finish negotiations for the deal this Wednesday, when it will hold its annual shareholder meeting, but now Toshiba may have pushed back its self-imposed deadline.

The hotly contested auction has seen a consortium, led by Japanese government investors and including US private equity firm Bain Capital, chosen as preferred bidder but the group's offer was only hastily and awkwardly put together this month. Bain is planning to invest 850 billion yen and South Korea's SK Hynix will apparently provide half the amount Bain puts up in the form of financing, according to Reuters sources. "Given the nature of the fund consortium, it is very likely for the alliance to completely sell the memory division to SK Hynix in the future", WD argued.

Two people familiar with the sale process who were not authorized to speak to the news media have said Western Digital is offering less money than the consortium Toshiba favors. "This potential course of action would make further litigation inevitable".

It seems this move has not prevented Toshiba from moving towards the closure of a sale of the memory business.

"Western Digital continues to believe it is the best partner to advance Toshiba's legacy of technology innovation in Japan", Western Digital said in a statement.

By doing so, Toshiba says, Western Digital has damaged Toshiba's and TMC's reputation. The chipmaker, which is relatively weak in NAND chip technology, has said previously that it had chose to join the consortium as it sees business opportunities.

While Western Digital has been unable to block Toshiba's deal directly, the company's concerns may be one reason that the sale has been delayed. Representatives for Bain could not be reached for comment outside regular office hours.

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