WDC is channelling its inner Theodore Roosevelt in its public negotiating stance with Bain Capital and Toshiba.
Bain Capital is leading a consortium containing three WDC competitors in its bid to buy Toshiba's Memory Business and its stake in the Toshiba-WDC flash foundry joint ventures. WDC tried to buy the Toshiba Memory Business and failed, with its foundry JV partner favouring the alternate Bain Capital consortium'a $18bn bid.
As part of its carrot-and-stick bid strategy, WDC started legal proceedings in the International Arbitration Court, asserting that the JV terms and conditions with its SanDisk subsidiary effectively prevented Toshiba selling its JV stake without WDC consent. Toshiba has a differing view of course.
The Roosevelt position is "If you’ve got them by the balls, their hearts and minds will follow," and WDC has put a FAQ statement, claiming its legal position is unassailable.
WDC is upping the legal ante here:
- Several of its SanDisk subsidiaries have filed an additional Request for Arbitration with the ICC International Court of Arbitration related to the three NAND flash-memory joint ventures operated with Toshiba.
- Seeking a permanent injunction preventing Toshiba from making unilateral investments in manufacturing equipment for Fab 6 without first giving SanDisk the opportunity to make a comparable investment in expansions and conversions of JV capacity for BiCS 3D NAND flash memory.
Fab 6 is the JV's foundry facility for more 3D NAND production. WDC says Toshiba's decision to unilaterally invest in manufacturing equipment at Fab 6 Operations constitutes a breach of the JV agreement.
We believe that our NAND supply requirements through calendar 2018 are secure, with no meaningful supply from Fab 6 anticipated until calendar year 2019.
We will continue to act in the best interests of our stakeholders, protecting SanDisk's interests in the JVs and consent rights through both our request for injunctive relief and the arbitration process.
There are no ongoing discussions between the Bain Capital consortium and WDC, contrary to what Bain had implied in Japan.
Toshiba wants, as it were, a divorce from its foundry JV spouse, WDC, and Western Digital is refusing to agree to a separation. Publicly it's confident its legal cards constitute a winning hand and Bain and Toshiba will be forced to recognise this, eventually, and talk terms.
Western Dig can afford to wait, unlike Toshiba which needs its Memory Business sale done, dusted and complete by March 2018 to avoid a Tokyo stock exchange delisting and potential financial disaster.
Its position is that it has Toshiba where it wants it and is warning off Toshiba and Bain.
Were Bain to replace consortium members Kingston Memory, Seagate and SK Hynix with WDC and somehow keep Apple and Dell in its consortium as well, then there might be a way forward for Bain. But you get the idea Western Digital would be happy for the Bain gang to simply go away and let a WDC group buy out Toshiba's stake in the JV.
There is opposition in Toshiba's executive and boardroom ranks to such a scheme, and we can't wait to see what happens next. ®