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Latest developments in Toshiba chip sale dispute

December 12, 2017

(Copyright: Fortune)

While one of the OEM’s Hong Kong-based investors advises the sale of its chip unit is “no longer necessary”, Toshiba looks set to conclude its dispute with Western Digital.

Events are proceeding apace with regards to Toshiba and its hotly contested chip business sale to a consortium led by Bain Capital.

This week, Reuters reported that one of the Japanese corporation’s Hong Kong-based activist investors had declared the sale “no longer necessary”, due to the funds Toshiba had amassed from its “recent capital injection”.

The hedge fund, Argyle Street Management Ltd, stated this in a letter sent to Toshiba’s board at the beginning of this week, according to Toshiba CIO Kin Chan.

Argyle is the first shareholder to “openly voice opposition” to Toshiba’s proposed chip unit sale, and is “already in talks with at least three funds who share the same view,” revealed Chan. Argyle also wrote that the $18 billion price tag assigned to the chip unit “significantly undervalues the business” and proposed a meeting with Toshiba’s Board in December or January 2018.

While a Toshiba spokeswoman declined to comment on the letter, she did reveal that Toshiba “was working to complete the sale” to the Bain Capital-led consortium “to ensure that Toshiba Memory has the resources it needs to continue to innovate and deliver for a fast-growing flash memory market.”

The OEM made the well-publicised decision back in September 2017 to sell Toshiba Memory, which is the world’s second biggest producer of NAND chips, to the consortium led by Bain Capital as a way of off-setting the costs it incurred over the failure of its US nuclear power unit. Toshiba has also secured a $5.3 billion cash injection “from overseas funds” in a bid to avoid being de-listed.  

As has been well-documented in mainstream media, Western Digital, Toshiba’s chips business partner, sought to block the sale of the chips business. However, this week it has been revealed that the two companies “have agreed in principle to settle their legal dispute […] with a formal announcement expected within the next 24 hours”, reports Bloomberg.

As a result of the settlement, Western Digital will drop its arbitration claims and Toshiba will also end its legal claims against Western Digital. In addition, Western Digital “will be able to invest alongside Toshiba in a cutting-edge chip plant in Japan and receive a guaranteed supply of next-generation memory chips”.

Toshiba shares rose by 10 percent in the wake of the announcement that a resolution to the legal battle was close.  


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