Toshiba said on Thursday that it had finally signed an almost $17.8 billion deal to sell its memory chip business to Bain Capital and other investors. Now, the question is whether the deal can withstand the legal talons of Western Digital.
Toshiba said in a statement that it would sell to a holding company called Pangea, which was founded explicitly for the sale. The sale, which comes after an acrimonious auction marked by confusion and reversals, could give Toshiba a booster shot to recover from billions of dollars of losses from its American nuclear power unit.
Pangea is buying Toshiba with around $1.9 billion from Bain Capital and $240 million from Japan’s Hoya. South Korea's SK Hynix will pay $3.50 billion while U.S. investors, including Seagate Technology, Kingston Technology, Apple, and Dell Technologies will pitch in $3.7 billion. Loans will account for another $5.3 billion of Pangea’s funding.
Toshiba is also investing $3.1 billion into Pangea, giving it influence over the world’s second largest producer of NAND flash. This means that Japanese firms will hold more than half of Pangea’s common stock, which was a sticking point for the Japanese government in recent months. None of the American investors will have voting rights.
The pair of financial funds owned by the Japanese government, the Innovation Network Corporation of Japan and the Development Bank of Japan, which have been in the sale conversation for months, are not investors. Toshiba said in a statement that both have “expressed their interest in investing in Pangea or TMC at a later time.”
Though the deal ends the grueling auction process, Toshiba is also contending with legal opposition. On Tuesday, Western Digital said that it was seeking an injunction to block the sale. For months, Western Digital has argued that it should have final word on the sale because of its joint venture with Toshiba. Western Digital has also been opposed to rival SK Hynix’s involvement in the deal.
On Thursday, Toshiba said in a statement that there would be restrictions on SK Hynix, which is one of the world’s largest makers of NAND flash. SK Hynix would be "firewalled" from accessing any of Toshiba's proprietary technology and be restricted to 15% of common stock for 10 years after the deal closes, which is scheduled for March.
Western Digital said in a Tuesday statement that it was disappointed in Toshiba’s decision, and the company’s refusal to accept concessions. Western Digital offered to financially step away from the group that it had assembled to fund the deal, which included the American investment firm Kohlberg Kravis Roberts and the Innovation Network Corporation of Japan.
The Japanese conglomerate said that the deal would move forward even if the litigation lasts for 24 months like Western Digital says it could.