Toshiba agreement on sale to Bain-led consortium protested

Toshiba is now claiming that the sale is proceeding, having signed a memorandum of understanding (MOU) which would see a consortium led by Bain Capital Private Equity LP and including memory giant SK Hynix acquire the shares of Toshiba Memory Corporation.

Western Digital, which bought SanDisk a year ago, has argued the sale might violate terms of the joint venture with Toshiba. As the preferred (by Toshiba) buyer, the Bain Capital-lead group deal is reportedly worth almost 2.4 trillion Yen ($22 billion USD) including $1.8 billion earmarked for infrastructure. That will avert an impending March 2018 de-listing from the Tokyo Stock Exchange on the grounds of negative net worth - liabilities exceeding assets - for a second successive year.

Last week, it became public knowledge that Toshiba was considering a proposal from Western Digital that included legal action. Apple spokesman Josh Rosenstock declined to comment.

But after Western Digital opposed the move, it said it was talking to others. But talks stalled as Toshiba, fearing Western Digital was angling to eventually take over the chip business, sought to limit the USA firm's future stake in the unit, the sources added.

'Furthermore, it is surprising that Toshiba would continue to pursue a transaction with a consortium led by Korea-based SK Hynix Inc. and Bain Capital Japan without SanDisk's consent, as the language in the relevant JV agreements is unambiguous, and multiple courts have ruled in favour of protecting SanDisk's contractual rights. They made a decision to pull out of the consortium following the emergence of a lawsuit filed against Toshiba by Western Digital. The iPhone maker's largest deal to date was the Beats acquisition in 2014. The Japanese company disputes that and sued Western Digital for more than $1 billion for interfering in the auction.

The precise composition of the Bain group is still in flux and may change, the people said. Bloomberg reports that Japan's Ministry of Economy, Trade and Industry, wanting a deal to happen sooner rather than later, previously urged Toshiba to accept Western's offer, and that two Japanese government-backed funds that had supported both offers "decided to pull back from the Bain bid in the face of litigation from Western Digital". The company sought injunctive relief after Toshiba announced in June that the Bain-led group was the preferred bidder and it planned to strike an agreement by June 28.

Vanessa Coleman

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