Toshiba puts Bain Capital consortium in the lead to buy its lucrative chip unit
Tokyo — Cash-strapped Japanese industrial giant Toshiba said on Wednesday that it had picked a consortium led by US investor Bain Capital as the leading candidate to buy its prized chip business, in a deal reportedly worth about $18bn.
The development is the latest twist in a long-running saga, as Toshiba considers three groups of suitors for its lucrative chip business.
The Bain Capital-led group also includes the state-backed Development Bank of Japan and the public-private Innovation Network Corp of Japan, as well as South Korean chipmaker SK Hynix.
Toshiba said its board of directors would continue talks with the consortium after it came up with a new proposal during the talks. "The company will work to expedite the conclusion of a stock purchase agreement by the end of September," Toshiba said.
However, Toshiba stressed that it was a "nonexclusive" agreement that "does not eliminate the possibility of negotiations with other consortia". Other suitors in the frame are a group led by Western Digital, Toshiba’s US-based chip factory partner and Taiwan’s Hon Hai Precision, better known as Foxconn.
California-based Western Digital voiced disappointment but stressed it had not given up on its bid.
"We are disappointed that Toshiba would take this action despite Western Digital’s tireless efforts to reach a resolution that is in the best interests of all stakeholders," it said in a statement.
Selling the high-performing business too cheap is not in the interest of shareholders
"Our goal has been — and remains — to reach a mutually beneficial outcome that satisfies the needs of Toshiba and its stakeholders, and most importantly, ensures the longevity and continued success" of the joint ventures, it said.
Selling the profitable chip division is seen as key to Toshiba’s survival, as one of Japan’s best-known firms battles to recover from multibillion-dollar losses from US nuclear operations.
It could also face the humiliating prospect of being delisted from Japan’s stock exchange if the sale does not raise the sufficient funds by an end-March cut-off date for closing accounts.
But some analysts said Toshiba should beware of selling off the much-coveted business — which accounts for about one-quarter of Toshiba’s total annual revenue — too cheaply.
Masahiko Ishino, an analyst at Tokai Tokyo Research Center, said he believed Toshiba did not intend to sell the entire memory chip business.
"Selling the high-performing business too cheap is not in the interest of shareholders," he said..
"For shareholders, it doesn’t make sense to give the treasure trove to someone else."