Western Digital mulls joint bid for Toshiba chip unit with Japan funds

Japan Economic Newswire |

Western Digital Corp. is considering bidding jointly for Toshiba Corp.'s chip unit with the state-backed Innovation Network Corp. of Japan and the state-owned Development Bank of Japan, sources close to the matter said Friday.

The move comes as the U.S. company is aiming to gain approval from the Japanese government, which is keen for domestic suitors to submit a joint bid as it is concerned Toshiba's key technology could get into the hands of a foreign company deemed risky to national security. The government is especially worried about a sale to a Chinese or Taiwanese company and could step in to block such a deal.

Western Digital, which has jointly invested in Toshiba's Yokkaichi flash memory plant in central Japan, is demanding exclusive negotiations for purchasing Toshiba's chip unit based on a joint-venture contract between Toshiba and U.S. semiconductor maker SanDisk Corp. which it owns. The contract says Toshiba cannot put its chip unit up for sale without approval from Western Digital.

But with Taiwan's Hon Hai Precision Industry Co., which bought Japanese display maker Sharp Corp., submitting the highest bid of nearly 3 trillion yen ($27 billion) for chip company Toshiba Memory Corp., Western Digital has apparently decided to join a Japan consortium to have Toshiba prioritize the U.S. firm in negotiations.

Toshiba spun off its prized memory chip business as a subsidiary this month, and now plans to sell a majority stake in it to raise funds to cover massive losses from its U.S. nuclear business.

On Tuesday, INCJ Chairman Toshiyuki Shiga told a press conference that the state-backed turnaround fund may invest in Toshiba's memory chip company. And an official at the fund said, "As part of the Japanese consortium, we will decide who to partner with. Teaming up with Western Digital could (make the process) smoother."

After closing the first round of bidding last month, Toshiba has narrowed down the potential buyers to four -- Western Digital, Hon Hai, SK Hynix Inc. of South Korea and U.S. chipmaker Broadcom Ltd.

Toshiba is likely to select the winning bid around July. No Japanese entities have participated in the bidding.

The four suitors are teaming up with other entities ahead of the second round of bids due in May.

Hon Hai is considering jointly investing in the chip unit with Sharp which it controls. It also has apparently asked SoftBank Group Corp. and Apple Inc. to join its bid to acquire the Toshiba chip unit.

Broadcom may partner with U.S. investment fund Silver Lake Partners, while SK Hynix is likely to be seeking to jointly form a consortium with Japanese companies, according to sources.


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