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It's make-your-mind-up time! Toshiba to decide if WDC gets its flash biz

Something may happen soon™

Some details have leaked about the bid consortium negotiating to buy Toshiba's interest in the flash foundry joint-venture it owns with WDC.

Toshiba has been dragged to the negotiating table by WDC's time-consuming legal delay tactics because it faces a March 2018 deadline for resolving recapitalisation issues that threaten the corporation's survival. Read the background here.

The bid amounts to ¥1.9tn ($17.4bn) and the contributions from the main players are:

Party Yen Contribution Dollar Contribution
WDC ¥150bn $1.4bn
INCJ ¥300bn $2.8bn
DBJ ¥300bn $2.8bn
KKR & Co ¥300bn $2.8bn

The contribution total from the four main players is ¥1.050tn ($9.8bn) with the missing ¥850bn ($7.6bn) coming from other Japanese banks and companies.

To help gain acceptance from Toshiba, WDC will:

  1. Limit its ownership to <20 per cent, funded by convertible bonds
  2. Forego management decision veto rights
  3. Not seek a management role

If the WDC-led consortium's bid succeeds, more than 60 per cent of the voting rights will be held by Japanese parties. WDC would own up to 60 per cent of the joint venture after it converts its bonds.

We have no insight into how the WDC bid consortium would be managed. The state-backed INCJ (Innovation Network Corporation of Japan) and DBJ (Development Bank of Japan) would naturally seem to have a claim on management positions, as would KKR&Co (Kohlberg Kravis Roberts and Company).

Toshiba and WDC's CEOs are negotiating face-to-face in Tokyo and a decision by Toshiba in favour of the WDC consortium could be announced by August 31. ®

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