Toshiba memory business sale points to Bain-led consortium

The Toshiba memory business could be sold to a Bain Capital-led consortium that reportedly includes Apple, Dell Technologies and Seagate if the parties can strike a deal that passes legal muster over the objections of flash partner Western Digital.

Toshiba’s Board of Directors voted on Wednesday to sign a memorandum of understanding with Bain Capital after receiving a new proposal from the consortium. Toshiba claimed it would try to reach a definitive agreement with the Bain-led group by month’s end, but the company also noted the memorandum is non-binding, leaving the door open for other bidders.

Toshiba has been trying to sell its profitable memory business to cover enormous losses associated with its struggling U.S.-based Westinghouse Electric nuclear power division. Bids are reportedly in the range of $18 billion to $20 billion.

In addition to the Bain-led consortium and a Western Digital-backed group, Toshiba confirmed that a group led by Hon Hai Precision Industry Co. Ltd., also known as Foxconn, a Taiwan-based electronics manufacturer, has been in the running.

Toshiba said the Bain-led consortium includes the Innovation Networking Corp. of Japan and Development Bank of Japan. But the Wall Street Journal reported the group seeking to buy the Toshiba memory business also includes Apple, Dell, Seagate and Korean chipmaker SK Hynix.

The involvement of Dell and Seagate would throw two prominent storage vendors into the mix of companies seeking a share of Toshiba’s coveted memory business. Seagate is Western Digital’s main hard disk drive (HDD) competitor, but has lagged in sales of faster NAND flash memory-based solid-state drives (SSDs). Unlike some of the leading SSD manufacturers, Seagate has had no stake in a semiconductor fab that produces NAND flash chips. Seagate declined to comment on the Toshiba memory business.

Western Digital also bidding for Toshiba memory business

Western Digital, which became a joint venture partner in the Toshiba memory business through its 2016 acquisition of SanDisk, is also part of a consortium with a bid to acquire the Toshiba memory business.

Through a prepared statement, Western Digital expressed its disappointment that Toshiba signed the memorandum with the Bain-led consortium despite its “tireless efforts to reach a resolution that is in the best interests of all stakeholders.”

Western Digital claimed it has been “flexible” and “constructive” and submitted numerous proposals to address Toshiba’s concerns, and noted “multiple courts have ruled in favor of protecting SanDisk’s contractual rights.”

San Jose, California-based Western Digital has pursued legal action through the California court system, claiming the sale of the Toshiba memory business cannot take place without SanDisk’s consent. The company sought injunctive relief after Toshiba announced in June that the Bain-led group was the preferred bidder and it planned to strike an agreement by June 28.

Just prior to a July court hearing, Toshiba and Western Digital worked out an agreement that was approved by a San Francisco Superior Court judge. The court order requires Toshiba to publicly announce within 24 hours any agreement that “contemplates a closing” to sell its share of the flash memory joint ventures and give SanDisk two weeks’ written notice before any closing occurs.

In August, the court granted SanDisk’s request for a preliminary injunction to stop Toshiba from prohibiting SanDisk affiliates from accessing shared databases and refusing to ship certain engineering wafers and samples to ensure continuing operation of their NAND flash joint ventures. Toshiba is appealing the order.

Western Digital sought injunctive relief through the San Francisco Superior Court while its arbitration requests remain pending with the International Court of Arbitration, a Paris-based institution operated by the International Chamber of Commerce. The company is seeking to undo Toshiba’s April 1 transfer of its NAND flash memory joint venture interests to the Toshiba Memory Corp. subsidiary and prevent any subsequent sale without SanDisk’s consent.