After a bidding war that lasted for eight months and shook corporate Japan, the Toshiba memory chip business is likely to be acquired by Bain Group.
It’s the crown jewel of the Japanese tech company. The deal is for $18 billion and the price the buyers are willing to pay for the business shows how important the Toshiba memory chip is to the worldwide tech industry.
The Bain Group is composed of several tech groups in the U.S. and Japan, as well as Apple, Dell and Bain Capital. Rival bidders for the Toshiba memory chip business include Foxconn of Taiwan and Western Digital of the U.S.
It was a messy bidding process that included several courtroom battles. On Wednesday, however, it was announced that Toshiba had finally picked the Bain group as the winning bidder.
Toshiba said they chose Bain because it would allow the memory chip business to remain independent. Moreover, they liked the Bain proposal of having limited control over the business from non-Japanese companies.
Toshiba Memory Chip Special Deal
Acquisition of the Toshiba memory chip business will be through Pangea, which was specially created by Bain. It will receive substantial investment from various companies, such as Apple, Kingston, Dell, Seagate, Hoya Corp. and SK Hynix, a chipmaker from South Korea.
It is said that Foxconn will also be an investor. Toshiba will also invest $3.1 billion in the acquisition company so it can still get shares in the business.
Because of the presence of Asian rivals as investors in Pangea, Toshiba agreed with Bain to institute appropriate restrictions in the company to protect Toshiba’s chip making technology.
There is still no news on how much money Apple will be investing in Pangea. The Development Bank of Japan and Innovation Network Corporation of Japan (INCJ) will also be investing in Pangea later after Toshiba has settled its issues with Western Digital and SanDisk.
Although the Bain Group has been chosen by the Toshiba memory chip business as the winning bidder, it is not smooth sailing for the conglomerate just yet.
While the challenge from Western Digital, a data storage firm in the U.S. was fended off by Bain Group, SanDisk, a subsidiary of Western Digital has a joint partnership with Toshiba.
The deal is still being blocked off by Western Digital. SanDisk has also filed new proceedings in the International Court of Arbitration against Toshiba on Wednesday. SanDisk is trying to stop Toshiba from investing in new flash memory production line called Fab 6.
The facility is located in Yokkaichi, Japan. Western Digital wants Toshiba to stop investing in the new Fab 6 facility unless it allows SanDisk to also invest in it.
The International Court of Arbitration is a branch of the International Chamber of Commerce. Its function is to find resolution commercial disputes among international companies.
The announcement of the acquisition caused its shares in Tokyo to dip by 4% on Thursday. Westinghouse filed for bankruptcy earlier after its collapse and it cost Toshiba about $6.4 billion. The money from the sale will help the company survive and retain its 153,000 Japanese workers.
Toshiba memory chip is the second largest producer of NAND memory chips in the world. The deal will potentially help Toshiba to put much-needed cash into its coffers.
The Japanese company suffered a massive financial crisis because Westinghouse, its nuclear unit in the U.S. went bankrupt. If the company cannot turn its finances around before the fiscal year ends, the Tokyo Stock Exchange threatens to delist Toshiba.