Toshiba Agrees to Sell Memory Chip Unit to Bain Group

Kelley Robertson
September 21, 2017

Toshiba has sold its prized semiconductor business to a group led by U.S. private equity firm Bain Capital for around $18bn (£13.3bn).

Toshiba planned to conclude a deal on the sale of the unit, Toshiba Memory Corp., within the day and make an announcement later, according to the sources.

It has partnered with South Korea's SK Hynix Inc and brought in U.S. buyers of Toshiba chips such as Apple Inc and Dell Inc to bolster its bid.

Toshiba intends to see the deal through in spite of expected legal objections from partner Western Digital Corp (NASDAQ: WDC), which claims veto power. The unit, Toshiba Memory Corp, is the world's second-largest producer of NAND flash memory. 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.

Toshiba's board has come under intense pressure from the company's biggest lenders, a trio of Japanese banks, to sell its prized asset ahead of a March 2018 deadline.

On Tuesday, sources had said Toshiba was leaning towards selling the branch to its USA joint venture partner Western Digital Corp.

U.S. firm Bain Capital's acquisition is backed by a consortium of domestic and foreign investors, most notably Apple, Seagate and Dell, which will both provide financial support, as well as Toshiba itself, which will reinvest 350.5 billion yen into the new company. The people declined to be identified as they were not authorized to speak on the matter. 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 KKR and Innovation Network Corp. of Japan worked on a revised proposal.

The group needs the proceeds to plug a huge hole in its shareholder equity created by massive writedowns on its United States nuclear business.

Late on Tuesday, sources had said Toshiba was leaning toward selling the business to its USA joint venture partner Western Digital Corp.

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