Western Digital offers to drop bid for Toshiba memory business

The seemingly generous offer is made with the view of improving their joint venture.
Written by Charlie Osborne, Contributing Writer

Western Digital has offered to withdraw from the group bidding for Toshiba's flash memory chip business with the view of strengthening its position in the firms' joint venture.

As reported by Reuters, talks have recently stalled over Western Digital's stake in the chip business, and an agreement has yet to be reached which does not result in a long antitrust review by regulators.

A consortium of companies including Western Digital, private equity firm KKR & Co, and Innovation Network of Japan and Development Bank of Japan previously offered approximately 1.9 trillion yen ($17.4 billion) for the unit.

However, Bain Capital -- with assistance from Apple -- has recently submitted a bid for the business worth two trillion yen.

According to sources close to the talks, Western Digital has offered to drop out of the group bidding for the business as a potential solution. However, in return, the data storage giant wants to secure a stronger position in Toshiba and Western Digital's joint venture at a major plant in Japan.

The plant is the key production facility for Toshiba's NAND memory chips, and Western Digital has asked for Toshiba to agree to a set of terms in order to drop out of the bidding war. For example, the firm wants assurance that Toshiba and Western Digital will invest jointly in a new production line, according to the news agency.

Should Toshiba agree, this may bring to an end months of delays in selling the coveted business.

Minato, Tokyo-based Toshiba's flash memory chip business provides components for products including smartphones and tablets. Toshiba's memory products make up the bulk of the firm's operating profit, which highlights how much financial difficulty the company is in to consider selling the business at all.

A failed venture into nuclear power, the acquisition of Westinghouse Electric in 2006 for $5.4 billion, has cost Toshiba dearly. The Japanese tech giant's US nuclear power arm filed for bankruptcy protection this year as delayed plant construction projects sent the balance sheet too far into the red, forcing the unit to eventually stop operations.

The unit filed for Chapter 11 protection, but in doing so, Toshiba lost not only $6.3 billion due to the failure of the projects, but also faces charges of roughly $9 billion.

The firm's former chairman, Shigenori Shiga, resigned back in February due to the catastrophe.

In order to cover the severe losses the acquisition has caused, Toshiba must give up its chip business.

Unless a deal is reached soon, Toshiba will likely report losses for the second year in a row, which will potentially impact the Tokyo-based firm's position on the stock market.

Toshiba's current "href="http://www.telegraph.co.uk/business/2017/06/23/toshiba-stock-knocked-top-tier-listing-financial-woes-deepen/"" href="http://www.telegraph.co.uk/business/2017/06/23/toshiba-stock-knocked-top-tier-listing-financial-woes-deepen/" target="_blank" class="c-regularLink" rel="noopener nofollow">financial outlook suggests that sales will reach 4.87 trillion yen ($43.8 billion), but predicted losses are expected to be ‎995.2 billion yen.

Before making the decision to sell off the chip business, Toshiba attempted to stay above water by performing a major restructure and laying off thousands of employees, as well as selling the company's PC business.

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