Toshiba Reaches Deal With Bain-Apple Group to Sell Chip Business

Toshiba itself will retain just over 40 percent of the microchip unit, Toshiba Memory Corporation, which is one of the world’s largest producers of flash memory chips. Those chips are used to store data in smartphones and other digital devices.

In negotiating the deal, Toshiba struggled to balance its need for cash and its desire to retain control of the microchip unit, which has been described as the crown jewel in its sprawling portfolio of businesses.

Toshiba pioneered its core technology, NAND flash memory, and the unit has generated the largest share of Toshiba’s profits in recent years. Among Toshiba’s concerns was that its technology could fall into the hands of investors, like SK Hynix and Kingston, which are also its competitors.

Though Toshiba will retain only a minority of the chip unit’s shares, it will still exercise significant control.

The American investors, whose precise financial contributions were not disclosed, will receive preferred shares that do not carry voting rights, Toshiba said. In addition, SK Hynix would be limited to an ownership stake of no more than 15 percent for 10 years.

In going ahead with the signing, Toshiba brushed aside objections by one of its business partners, Western Digital, the American storage company. Western Digital might still move to block completion of the deal.

Western Digital and Toshiba share ownership of a flash memory production operation in Japan. Because of that, the American company contends that Toshiba cannot sell the chip unit without its approval. Western Digital said this week that it would ask a court for a legal injection against the deal.

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Source: New York Times – Technology

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