Toshiba’s board of directors on Wednesday signed a memorandum of understanding with the consortium led by US private equity group Bain Capital and technology giant Apple, Development Bank of Japan and Korean chipmaker SK hynix.
“Toshiba’s board of directors has determined to continue negotiations with the Bain-led consortium on the basis of this new proposal, and the company will work to expedite the conclusion of a stock purchase agreement by the end of September,” the Japanese company said in a press release.
However, the memorandum is not legally binding, the company underscored, saying, “It has entered into a nonbinding memorandum of understanding with Bain. The signing of this does not eliminate the possibility of negotiations with other consortia.”
The other consortia here refers to two groups, one led by Western Digital and another led by Taiwan’s Hon Hai.
The Bain-led group was picked as a preferred bidder in June to buy the Toshiba chip unit, but negotiations haven’t proceeded well in the last two months due to opposition from Toshiba’s longtime partner, the consortium’s rival Western Digital.
Speculation had risen until last month that Western Digital would be the final bidder to take over the Toshiba unit, considering their yearslong partnership and a closed-door meeting between the chiefs of the two companies on the ongoing talks.
The situation quickly changed last week, as the Bain-led consortium proposed an additional financial investment plan to Toshiba, according to news reports.
In addition to the acquisition price of 2 trillion yen ($18.2 billion), the group decided to offer 400 billion yen for research and development for the Toshiba unit as a final proposal.
Bain and SK hynix are said to be providing a total of 567.5 billion yen, while Apple is said to be putting in 335 billion yen. The Japanese bank is providing loans worth 600 billion yen. The remainder is likely to be covered by several Japanese and US tech companies in the group.
“Nothing has been confirmed yet, and we have no comment on the going talks,” said an SK hynix official.
But details of the bid take the shine off for SK hynix, considering that the Korean chipmaker is looking for a stake in Toshiba’s memory chip business specializing in 3-D NAND flash.
According to Japanese news reports, SK is excluded from the stake ownership agreement.
The deal is said to involve Bain getting 49.9 percent of the chip unit, while Toshiba retains 40 percent. The remaining 10.1 percent is forecast to go to a Japanese entity.
A big reason behind SK hynix joining the Toshiba race was to gain leadership in the global 3-D NAND flash market by seeking technological cooperation. Toshiba is the world’s second-largest NAND flash chip producer, while SK hynix is the fifth, as of the second quarter of this year.
“Whether SK hynix has really given up the stake or not remains to be seen,” said a source from the financial industry. “Being part of the global consortium seems to work favorably for SK hynix, according to market responses.”
The ownership plan may have been set by Toshiba’s management as a maneuver to get approval from the Japanese government by easing concerns about technology leaks to foreign businesses and management intervention.
By Song Su-hyun (firstname.lastname@example.org)