FFS: Toshiba snubs WDC, goes crawling back to Bain, Hon Hai

What a beautiful mess

It ain't over till the fat lady sings and Toshiba isn't singing yet, failing to meet its own August 31 deadline and resuming talks with Bain and Hon Hai bid groups alongside the WDC consortium.

A Toshiba statement said:

While Toshiba exercised its best efforts to reach a mutually satisfactory definitive agreement with one of the consortia seeking to purchase TMC (Toshiba Memory Corporation), the negotiation with each consortium has not reached the point which will allow Toshiba’s Board of Directors [to] make a decision regarding the sale of TMC.

It added:

Toshiba is looking for a purchaser of TMC that is able to deliver flexible, rapid decision-making and enhanced financial options, and to promote further growth of TMC's memory business, while also being capable of contributing enough value from the sale if TMC to return the Toshiba group to positive equity.

Tosh will carry on talking with potential bidders to reach a definitive agreement which meets these objectives at the earliest possible date – no deadline has been set.

According to reports, the Bain Capital consortium, previously a preferred bidder, is offering ¥2tn ($18.1bn) and includes Apple along with the Innovation Network Corporation of Japan (INCJ) and the Development Bank of Japan (DBJ), both state-backed, along with Korean chip-maker SK Hynix. Apple uses Toshiba chips in its iDevices.

The WDC group bid is for ¥1.9tn ($17.4bn), which also includes both the INCJ and DBJ institutions.

The Hon Hai (Foxconn) group is said to be willing to bid even more.

We know that Japan does not want IP and jobs flowing to China, which a Hon Hai bid might risk. We also know that a winning bidder would have to work with the other half of the TMC NAND joint-venture, meaning WDC, and it does not want to work with competitor SK Hynix.

WDC has initiated legal action to delay the TMC sale, asserting it has veto rights over the sale and involving time-consuming International Arbitration Court proceedings. The Bain group previously had its bid stalled by this legal action, not wanting to put in large sums of cash until these proceedings had been resolved.

The Bain and Hon Hai bid groups return to the fray with previous issues unresolved and, possibly, talks with Toshiba have resumed as a way of putting pressure on WDC to come up with more cash and provide other concessions.

We understand WDC would pay ¥150bn to buy TMC convertible bonds, which would give it 15 per cent voting rights when converted to common stock. The sold TMC unit would go public in three years. Toshiba demands that WDC should not increase its stake for 10 years after that.

Some TMC execs have reportedly said they'll quit if WDC wins the TMC auction.

Hopefully, and to mix metaphors, the muddied waters will clear, the fat lady will clear her throat and start singing, Toshiba will get its cash and we hacks can then write about something else. ®

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