Western Digital, Toshiba settle fight over chip unit sale

Toshiba Western Digital settle legal dispute over $18B chip unit sale

The two companies said the deal settles all disputes in litigation and arbitration over Western Digital's objections to the planned sale of the companies' NAND flash memory SanDisk Corp joint venture. As part of the deal, Western Digital will instead be allowed to partner with Toshiba on a new production line that will manufacture advanced memory chips.

The agreement now struck between TMC, Toshiba, and Western Digital will see all pending litigation and arbitration actions withdrawn; in addition, TMC and Western Digital have agreed to jointly invest in a new memory fabrication facility in Yokkaichi, followed by a flash wafer fabrication facility in Iwate.

It seems as Toshiba and Western Digital have buried their war hatchets and are ready to take on Samsung in the chip industry in 2018.

It might have to clear further hurdles, such as possible anti-trust concerns.

The struggling Japanese conglomerate said Wednesday that it had settled a legal dispute with Western Digital, the USA data storage company, that threatened to block the microchip deal.

Western Digital, formerly based in Irvine and now in San Jose, is dropping arbitration claims in the USA that were aimed at stopping the sale to a consortium led by Bain Capital.

Looking to diversify beyond the maturing hard-disk-drive business, Western Digital closed on a roughly $19 billion buyout of USA flash memory maker SanDisk a year ago. Under that deal, Toshiba plans to cede a majority stake in the chip subsidiary to a group of investors led by the investment firm Bain Capital.

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The plan calls for TMC to eventually sell shares through an initial public offering.

The financially-troubled Toshiba, which took a major bath over a disastrous attempt to break into the USA nuclear energy market, announced it would spin-off its semiconductor arm, minus its imaging sensor business, in January this year.

Western Digital believed it had a trump card that would allow it to outmaneuver Bain: It contended that, under the terms of its joint venture contracts with Toshiba, Toshiba needed its approval to sell the microchip unit. The deal is structured so that Toshiba and Hoya Corp. will hold a majority of the voting stock, a solution that keeps control of sensitive technology in Japanese hands.

In return, Western Digital does at least get to stay in the flash memory business.

Toshiba raised 600 billion yen, or around $5.3 billion, in short-term funding to sustain it in case the sale to Bain was delayed. The transaction is still subject to regulatory approvals.



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