Toshiba & Bain Capital Sign A Memorandum On Chip Unit Sale

September 13, 2017 - Written By Dominik Bosnjak

Toshiba on Wednesday said it signed a Memorandum of Understanding with Bain Capital, essentially agreeing that its NAND memory chip division can be sold to the consortium led by the Boston, Massachusetts-based private equity firm which has been bidding for the unit for several months now. The move signals that Toshiba and the Bain Capital-led consortium concluded the majority of their sale negotiations and will now proceed to finalize relevant proceedings in the near future, with Toshiba presumingly being adamant to conclude the deal as quickly as possible given the circumstances, i.e. the fact that the conglomerate is amid a major cash crunch caused by its U.S. nuclear business Westinghouse Electric Company which filed for bankruptcy in early 2017.

According to the newly signed memorandum, Toshiba and Bain Capital’s consortium will officially conclude their negotiations by the end of the month, with the Japanese tech giant’s Board of Directors approving the move at a meeting earlier today. While the firm stated that the sole existence of the memorandum doesn’t exclude the possibility of its unit being sold to another party, such a scenario seems relatively unlikely at this point as the company is under pressure from both its creditors and the Tokyo Stock Exchange which is threatening to delist it in early 2018 if it’s unable to pull itself up from negative shareholder equity. While some of the company’s board members have been advocating for accepting the bid from Foxconn in a reportedly aggressive manner, Foxconn’s consortium is the least likely buyer of Toshiba’s NAND chip business due to the Taiwanese tech giant’s close ties to China which the Japanese government disapproves, industry sources said earlier this year.

The third and final bidder is a consortium led by Toshiba’s long-term partner Western Digital which is still officially pursuing its arbitration requests filed with the International Court of Arbitration in late spring and early summer with the goal of preventing Toshiba from selling the business without its consent based on their previous joint venture agreement. Apart from Western Digital, another factor which could slow down Toshiba in its efforts to sell its most profitable division is a potential antitrust review that the Japanese government could launch to investigate the fact that Bain Capital’s consortium contains SK Hynix, a South Korean semiconductor manufacturer and Toshiba’s direct rival.