Toshiba Sale Of Chip Unit Faces Hurdles -- WSJ
2017年9月29日 - 04:02PM
Dow Jones News
By Takashi Mochizuki and Kosaku Narioka
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 29, 2017).
TOKYO -- A nearly $18 billion deal for Toshiba Corp.'s
memory-chip unit could strengthen the No. 2 player in a
fast-growing industry -- if the deal survives regulatory and legal
hurdles.
Eight months after Toshiba said it wanted to sell part of the
unit, it finally signed a contract with a buyer Thursday. The buyer
group is led by Bain Capital LLC and will get financing from Apple
Inc., South Korean chip maker SK Hynix Inc. and other major
technology companies.
If the deal closes by next March 31, Toshiba's target date, it
is set to bring the troubled industrial conglomerate's balance
sheet back into the black.
Several of the companies involved in the buyer group are big
customers for the unit's NAND flash-memory chips and are hoping to
bolster Toshiba, a distant No. 2 to industry leader Samsung
Electronics Co. The chips are used in a broad range of electronics
from smartphones to computer servers.
Seagate Technology PLC, a maker of computer storage products
that joined the Bain-led consortium, said need for the chips was
growing.
"We must be able to support these demands," said Chief Executive
Steve Luczo.
The deal, if completed, will also create a loose alliance
between Toshiba and SK Hynix, which is No. 5 in NAND flash memory,
according to IHS Markit. The South Korean company is providing
about $3.5 billion in financing for the Bain alliance and is taking
bonds convertible into a stake of as much as 15% in the Toshiba
chip unit.
"The sale was a great opportunity for SK Hynix to catch up in
the NAND market and increase its presence in the broader computer
chip market," said Satoru Oyama, chief executive of Tokyo-based
consulting firm Grossberg. SK Hynix is already second to Samsung in
DRAM, another kind of memory chip.
But Mr. Oyama said he saw a high risk of the Bain deal failing
to go through because of objections by Western Digital Corp.,
Toshiba's partner in operating the flash-memory business. He said
SK Hynix would want to look for a plan B such as talking with
others in the market about partnerships.
Western Digital contends it has the right to veto the sale of
the chip unit and has brought a case at the International Court of
Arbitration. Toshiba says Western Digital doesn't have any veto
right.
If the arbitration panel orders Toshiba not to sell part of its
memory-chip unit, the Bain-led group would subtract that part's
value from the sale price, Toshiba said. Even so, a Toshiba
spokesman said the company expected it would get enough cash to put
its balance sheet back in the black by March 31.
Another hurdle is antitrust clearance, especially because of the
involvement of SK Hynix. To ease antitrust concerns, Toshiba
pledged that SK Hynix wouldn't be able to access the unit's chip
technology or raise its stake beyond 15% for the next 10 years.
Toshiba was the creator of NAND flash memory and long a leader
in the technology. But it fell behind Samsung in part because the
memory-chip plants require frequent multibillion-dollar investments
to keep pace. Those investments became more difficult in recent
years as Toshiba focused on its nuclear-plant business -- another
heavy user of capital.
When Toshiba's U.S. nuclear unit, Westinghouse Electric Co.,
filed for bankruptcy protection in March, it was clear that the
chip unit could stay abreast of rivals only with a large infusion
of money from the outside.
The unit lost precious months as Toshiba executives, bankers and
government officials debated who was the worthiest buyer. People
familiar with the business said it has lost some engineers with
expertise and fell behind Samsung in buying equipment needed to
make the latest chips, which is itself in short supply. A Toshiba
spokesman said the company believes it has secured the equipment it
needs.
Last month, Toshiba said it would spend about $1.6 billion to
beef up capacity at its main factory in Yokkaichi, central Japan,
and earlier this month it said it would open a new location in
northern Japan by the end of next year to meet rising demand.
One person familiar with the buyer group's plans said it
envisioned $15 billion to $20 billion in capital expenditures over
the next five years. The group is looking at a possible listing of
the chip unit, but it wouldn't happen for at least two years, this
person said.
Under the contract signed Thursday, Bain will hold 49.9% of the
chip unit's voting shares, with Toshiba retaining 40.2% and Japan's
Hoya Corp. holding the rest. Apple, Seagate, Kingston Technology
Corp. and Dell Technologies Inc. will together provide about $3.7
billion in financing, but those companies won't take voting
stakes.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com and
Kosaku Narioka at kosaku.narioka@wsj.com
(END) Dow Jones Newswires
September 29, 2017 02:47 ET (06:47 GMT)
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