Japanese conglomerate Toshiba is set to end its long-running feud with Western Digital – following its confirmation that it is set to enter talks with the US firm over the sale of its prized memory chip business. It has been reported that discussions between both entities had only reopened because negotiations with Toshiba’s preferred bidder had stalled.
Toshiba has been trying to sell off its memory chip business in a desperate attempt to recover substantial losses made from its now bankrupt US nuclear business Westinghouse. However, speculation regarding an imminent deal with Western Digital has helped the conglomerate on the Tokyo stock exchange, with shares rising by 4.6% by the end of morning trade.
Back in June, Toshiba selected a consortium which included Japanese government-backed funds, private equity firm Bain Capital and South Korean chipmaker SK Hynix to buy out its flash memory unit. However, the deal stalled when Western Digital, which is a partner in Toshiba’s chip plant threatened to take Toshiba to court, stating that it needed its consent to any sale brokered. The potential legal battle which would’ve ensued between the two companies unsettled the state-backed funds, which had appealed to Toshiba to resolve the conflict before any sale would be made.
It has been reported that Toshiba has now entered negotiations with both Western Digital and Taiwan’s Foxconn in relation to the sale, and its CEO Satoshi Tsunakawa confirmed to its lender that it has now prioritized talks with the US firm in a bid to get the deal processed by the end of this month.
It has been disclosed that Western Digital plans on investing heavily in the chip unit through debt financing, which will eventually see it take a stake of less than 20% in the business. Sources close to Western Digital have revealed that many executives within the company still remain wary that an agreement can be reached. They believe it will be difficult given the animosity that now exists between both parties.
The breakdown in relations between the two companies soured rapidly when the US firm acquired SanDisk, which was Toshiba’s memory chip business partner for the best part of 17 years, after they failed to agree on terms of a new joint-venture contract.
Analysts have suggested that Toshiba will be keen to close the sale by the end of the fiscal year in order to avoid reporting negative net worth – liabilities exceeding assets for the second year in-a-row. Consecutive years of negative net worth would result in a delisting from the Tokyo Stock Exchange.