A Toshiba logo is seen on a printed circuit board. Picture: REUTERS
A Toshiba logo is seen on a printed circuit board. Picture: REUTERS

Tokyo — Toshiba has agreed to sell its flash memory chip unit to a group led by Bain Capital and plans to invest ¥350bn ($3.1bn) alongside the US buyout firm, according to a person familiar with the matter.

The Japanese company’s board agreed to the proposal at a meeting on Wednesday, ending a contentious bidding process that stretched over eight months.

Under the agreement, Bain, Toshiba, SK Hynix and Japan’s Hoya will pay about ¥960bn for common and convertible stock, said the person, asking not to be named because the matter is private.

Apple, Dell, Kingston Technology and Seagate Technology would spend about ¥440bn for convertible and nonconvertible preferred stock, the person said.

The special purpose entity making the acquisition would be called Pangea and would receive about ¥600bn in loans, the person said.

The Bain-led group was identified as a preferred bidder almost three months ago, but the process has been delayed by lawsuits, government opposition and corporate indecision.

Toshiba chose Bain over a group led by KKR and two state-backed funds, Innovation Network Corporation of Japan and Development Bank of Japan.

To complete the sale, Toshiba may have to overcome resistance from joint venture partner Western Digital.

Toshiba is selling off its chips business to pay for losses in its US nuclear business.

The company needs to raise the money by March to avoid having its shares delisted from the Tokyo Stock Exchange.

The auction has been complicated by legal action from Western Digital, which has argued it should have veto rights in any sale because of its partnership with Toshiba in the chips business.

The Japanese company disputes that and sued Western Digital for more than $1bn for interfering in the auction.

Under the deal agreed on Wednesday, the Bain group has agreed to fulfil the acquisition regardless of the outcome of the Western Digital dispute, the person said.

Reuters reported earlier that Toshiba’s board had chosen Bain.

The auction has gone through dizzying twists and turns. Last week, Toshiba signed a memorandum of understanding with Bain, with the goal of reaching a final deal before the end of the month. But the MOU did not preclude Toshiba from continuing to negotiate with other bidders.

This week, KKR and INCJ worked on a revised bid, with the Japanese fund taking a more prominent role in the consortium and planning an initial investment of about ¥550bn, up from the previous ¥300bn, people familiar with the matter said.

Under the revised proposal, Toshiba could buy back equity from INCJ and DBJ later, the people said.

Bain then revised its offer too. The US buyout firm sought more financial support from Apple, asking for about $7bn in capital, up from a previous agreement for about $3bn, said a person familiar with the matter.

It is not clear exactly how much capital Apple will ultimately contribute to the offer.

Bloomberg

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