Toshiba Signs $17.7 Billion Deal to Sell Memory Chip Unit to Bain-Apple Group

After lengthy negotiations, Toshiba this morning officially agreed to sell its lucrative memory chip unit to a global consortium that includes Apple, in a deal reportedly worth $17.7 billion (via The Wall Street Journal).

Toshiba said the legally binding agreement ensures the chip unit will remain a Toshiba affiliate even after it has become the property of the Bain Capital-led group, which includes Apple, Dell, Seagate, Hoya, and SK Hynix.


Toshiba and Bain want to get the deal done by the end of March, despite ongoing litigation with Western Digital, which jointly operates the memory business with Toshiba. Western Digital claims it has the right to vote on the sale. Another hurdle is receiving antitrust clearance, which could take six months or longer, according to WSJ.

Toshiba originally announced it would sell its NAND flash memory unit in January 2017 to raise funds to cover huge losses associated with its U.S. nuclear subsidiary, Westinghouse. Toshiba wants to close the deal to raise the cash by March so it can remain listed on the Tokyo Stock Exchange.

Several companies, including TSMC, Foxconn, Amazon, Google, Broadcom, and a range of private equity firms entered bids this year in an effort to get a piece of the memory chip unit.

In a statement given to Reuters on Thursday, SK Hynix said the Bain-led group will hold 49.9 percent of the voting rights in the chip unit, while Toshiba will hold 40.2 percent and Japan's Hoya Corp will own 9.9 percent. Apple, Dell, Seagate, and Kingston Technology will invest in the form of non-convertible preferred shares, it said.

SK Hynix also revealed it will invest 395 billion yen ($3.5 billion) in the unit. Other companies declined to comment, but individual investments are believed to be 350.5 billion yen ($3.11 billion) from Toshiba, 212 billion yen ($1.88 billion) from Bain, and a combined 415.5 billion yen ($3.68 billion) from Apple, Dell, Kingston, and Seagate.

Apple has been interested in the memory chip unit because NAND flash is an essential component of its iPhones and iPads. Only a handful of companies make the chips and the dominant player is Samsung, Apple's biggest rival in the smartphone industry.

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Toshiba to Sell Memory Chip Unit to Consortium That Includes Apple

After months of negotiations, Toshiba has decided to sell its memory chip unit to a global consortium that includes Bain Capital, SK Hynix, Dell, and Apple, reports Reuters.

No official announcement has been made by Toshiba as of yet, but the company is expected to announce the sale on Wednesday. As of Tuesday, Toshiba was said to be leaning towards a group backed by Western Digital, but Western Digital is said to have failed to agree to some of Toshiba's terms regarding limits on WD's future stake in the business.


Western Digital may still attempt to block the sale and is said to be prepared to seek a court injunction to stop it. Western Digital previously invested in Toshiba's semiconductor plant and claims its consent is required for the sale.

Toshiba first announced plans to sell its NAND flash memory unit in January of 2017 to raise funds to cover losses associated with its U.S. nuclear subsidiary, Westinghouse. Many companies, including TSMC, Foxconn, Amazon, Google, Broadcom, and a range of private equity firms entered bids in an effort to get a piece of the memory chip unit.

The consortium, led by Bain Capital, was selected as the preferred bidder in June, and in September, entered a higher bid amid fierce competition. Apple, SK Hynix, Dell, and Bain Capital are said to have offered a combined 2.4 trillion yen, equivalent to $22 billion, along with an additional 200 billion yen for infrastructure.

As of early September, Bain and SK Hynix were said to be providing a total of 567.5 billion yen, while Apple was reported to be offering 335 billion yen, equivalent to $3 billion. That sum is in line with reports suggesting Apple was prepared to spend several billion dollars for a "substantial stake" in the memory business.

Bain, Apple, Dell, and SK Hynix will own a combined 49.9 percent stake in the chip unit, with Toshiba keeping 40 percent and Japanese firms controlling the other 10.1 percent should the sale go through.

Apple already uses Toshiba's flash memory in its products. The iPhone 7 and iPhone 7 Plus include memory sourced from both Toshiba and SK Hynix.

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Apple Joins ‘Last-Ditch’ Bidding Effort to Win Toshiba’s Memory Chip Unit

Bidding for Toshiba's much-sought-after memory chip unit was supposed to end in June 2017, after first kicking off in March, but the manufacturer is still fielding bids from multiple interested parties, most recently including a $17.4 billion offer from Western Digital. Likely due to Western Digital's legal action against Toshiba's decision to sell the NAND chip unit, talks surrounding that offer have reportedly "stalled" and now a new consortium of companies -- including Apple -- has entered a "last-ditch" effort to win the bidding.

Led by Boston-based global investment firm Bain Capital, the consortium also includes Apple and South Korean chipmaker SK Hynix (via Reuters). This group plans to offer Toshiba $18.2 billion for its memory chip unit, with a goal of reaching a final decision by Thursday, August 31 now "unlikely." This is said to be due to bickering over exactly how much Western Digital might own of the memory chip unit after it's sold, no matter who wins the bidding, because of the Western Digital's business ties with Toshiba.

A consortium led by Bain Capital has made a revised last-ditch offer for Toshiba Corp’s chip unit worth about $18 billion, bringing in Apple Inc to help bolster its bid, sources with direct knowledge of the matter said.

The revised offer is worth some 2 trillion yen ($18.2 billion). Bain and South Korean chipmaker SK Hynix Inc will be responsible for 1.1 trillion yen, while Apple will provide up to 400 billion yen and Japanese banks will give around 600 billion yen in support, one of the sources said.
Many companies have entered bidding proposals for Toshiba's memory chip unit this year, including TSMC, Foxconn, Amazon, Google, Broadcom, and multiple private equity firms. Apple has already been associated with bidding interest as well, reportedly willing to spend several billion dollars to obtain a "substantial stake" -- potentially more than 20 percent -- of the chip unit. If Bain Capital's bid is the winner, Apple's stake would likely remain around that percentage.

Toshiba confirmed plans to sell its NAND flash memory unit in January 2017, as a way to raise funds that the company hopes will cover significant losses associated with its U.S. nuclear subsidiary Westinghouse. If part of the winning bid, Apple could obtain a stake in a unit that already provides flash storage to the Cupertino company, including 32GB, 128GB, and 256GB flash storage for the iPhone 7 and iPhone 7 Plus.

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Foxconn Attempts to Ease Concerns Over China Ties as Sale of Toshiba’s Memory Chip Unit Nears End

Foxconn chairman Terry Gou has spoken out about the ongoing sale for Toshiba's memory chip unit, which has made headlines over the past few weeks as multiple companies have entered the bidding to win the sought-after unit. Previously, Foxconn was perceived as a long shot for winning the bid due to its connections with China, a fact believed to sit unfavorably with Japanese-owned Toshiba.

Now, Gou is presenting points of argument as to why Foxconn's acquisition of Japanese technology would not hurt Toshiba nor the Japanese government, because he says Foxconn would not seek to import any of Toshiba's technologies to Foxconn's China plants (via DigiTimes). Gou argued that Foxconn is simply an enterprise "seeking new markets" in Japan, "and making investments in these markets is very normal."

With Foxconn's help, Gou said that Toshiba has the potential to improve its technology so it doesn't lag behind the advancements of its competitors. Another point of contention for Japanese officials fearful of Foxconn winning the unit centered upon the China-based company leaking secrets behind Toshiba's best technology, to which Gou said such a practice would never benefit Foxconn or any of its partners.


Gou felt he had to speak out "to clarify many of the false accusations that have been made about Foxconn over the past few weeks."
Gou said that leaking technology would not benefit Foxconn or any of Foxconn's partners, and would only hurt Toshiba's future development. With all the outcomes coming out negatively, there would be no point for Foxconn to leak IP, Gou stated.

Gou noted that Toshiba's technology R&D will remain and continue to be processed in Japan, a pointed out that a company with leadership in technology development does not need to be afraid of being copied.

Since Foxconn owns its production lines and plants, details of production procedures would be kept within the plants. Foxconn would also apply to patent Toshiba's technologies to prevent infringement, Gou noted.
Gou finally said that Foxconn is simply "looking to survive" by bidding on the Toshiba memory chip unit, as well as reduce costs and improve its supply chain delivery times. The last we heard about the bidding, Foxconn had rallied U.S. companies Apple and Amazon to chip in funds to help Foxconn win the unit. Foxconn's first bid was around $27B, and it was never clear if additional funds would be enough to calm Toshiba's worries about the company's ties to China.

In another corner of the ongoing bidding for Toshiba's memory chip unit, Western Digital has continued to go after Toshiba, this week seeking a court injunction that would prevent Toshiba from selling the unit without Western Digital's consent (via Reuters). Western Digital and Toshiba are partners in the chip manufacturing business, and the new injunction is said to have emerged after the U.S.-based Western Digital discovered it was left out of a new Japanese government-led group formed to come together and bid for the unit.

Although sources close to the sale say that Western Digital's legal actions threaten to throw the whole auction "into disarray," Toshiba has said in a statement that it is proceeding with selecting a bidder "by the second half of June," as has always been planned. A final, definitive winner for the unit is expected to be decided by June 28.


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Foxconn Partnering With Apple and Amazon In Renewed Attempt to Win Toshiba’s Memory Chip Unit

Apple and Amazon will join Foxconn in a bid to win Toshiba's NAND memory chip unit, which has been on sale since March and was previously said to finally conclude bidding sometime in June. Nikkei quoted Foxconn chairman Terry Gou as saying that Apple and Amazon will "chip in funds" to help Foxconn win the final bid (via Reuters).

Gou left out the exact amount of the funding that Apple and Amazon would provide, and it was also mentioned that Japanese manufacturer Sharp, which Foxconn acquired last year, will also take place in the bidding. In an official statement, Foxconn referenced Apple and Amazon by calling the U.S. companies "strategic partners" in the bid for Toshiba's memory chip unit, while mentioning that more details would come "at the appropriate time."

Apple Inc and Amazon.com Inc will join Foxconn's bid for Toshiba Corp's semiconductor business, the Nikkei business daily quoted Foxconn Chairman Terry Gou as saying on Monday. The two U.S. technology giants plan to "chip in funds", Gou said in an interview, according to the newspaper.

"Of course Apple and Amazon are offering money together, but I cannot comment on how much funds each company is putting on the table," Gou said at a hotel in Osaka.
The sale of Toshiba's chip unit has been riddled by a legal battle with Western Digital over the past few weeks, making it uncertain who -- if anyone -- would end up winning the bid for the unit. Following the announcement of the initial sale, Apple was reportedly looking into spending several billion dollars for a "substantial stake" in the Toshiba memory chip unit, as well as potentially partnering up with Foxconn in the bidding war.

Foxconn has already been suggested as an unlikely winner of the unit due to its deep ties with China, with the Japanese government likely to oppose any winning bid that would take key Toshiba chip technology out of the country. Foxconn's previous bid of $27 billion was reportedly rejected by Toshiba, so now it appears that the manufacturer will beef up its offering for Toshiba's unit with the help of Apple, Amazon, and Sharp, although it's unclear if more money will be enough for the China-based company to win.

According to Gou, if Foxconn would win Toshiba's chip unit it plans to keep the Japanese leadership in place, which it hopes is a way to appease the Japanese government ahead of the end of bidding.
"We will definitely not undermine nor interfere with [Toshiba's existing management]. We will treat them like the way we have been treating Sharp," Gou said, adding that he was confident that Foxconn stood a good chance of winning the bid.

"We let Japanese [managers] run Sharp ... we are also hoping that Toshiba's memory unit will survive into the next 50 to 100 years at least, like Sharp."
Other bidders include Broadcom and South Korea's SK Hynix, and the winner is expected to be announced sometime this month, ahead of Toshiba's next shareholder meeting.


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Sale of Toshiba’s NAND Chip Unit Faces Trouble as Western Digital Threatens Legal Action

Uncertainty over which company will end up with Toshiba's much-sought-after NAND chip unit -- the second-biggest in the world -- has deepened today with a report by Reuters, which states that the Japan-based Toshiba is now facing legal actions from its business partner and chip unit bidder Western Digital. The U.S.-based data storage company is claiming that Toshiba has violated a contract by transferring Western Digital's joint venture rights entirely to the newly formed chip unit, which Toshiba is soon to sell off.

As a result, Western Digital is reportedly asking for exclusive negotiating rights with Toshiba as a means to win the bid and retain its contract with the supplier, and the U.S. company is threatening legal action in the event that it does not. Western Digital currently operates a semiconductor plant in a joint partnership with Toshiba, but it is not seen as a favored bidder in the eyes of Toshiba executives because it has placed a "much lower offer than other suitors."


The legal process set in motion by Western Digital could not only delay Toshiba's NAND chip unit sale, which the company needs to be completed to offset a nearly $9 billion loss related to its overseas nuclear division, but could put an end to the auction altogether. Toshiba has rejected any of Western Digital's claims that it has violated the joint venture contract.
The clash between Toshiba and Western Digital - both its business partner and one of the bidders for the chip unit - risks delaying or even quashing an auction that the Japanese conglomerate is depending on to plug a $9 billion hole in its accounts.

But in a May 3 letter sent by Toshiba's lawyers, the TVs-to-nuclear conglomerate disputed Western Digital' s argument and said it would pursue all available remedies if it saw continued interference in the sale process. Western Digital's "campaign constitutes intentional interference with Toshiba's prospective economic advantage and current contracts. It is improper, and it must stop," the letter, which was seen by Reuters on Tuesday, said.
Western Digital now has until May 15 to sign a few agreements related to its joint venture partnership with Toshiba, and if it doesn't all Western Digital employees will be restricted from facilities, networks and databases related to Toshiba's NAND chip unit. According to Masahiko Ishino, an analyst at Tokai Tokyo Research Center, Western Digital has a solid ground for legal action: "From a commonsense standpoint, it's hard to buy Toshiba's argument that it doesn't need approval from its JV partner because it's almost a 50-50 joint venture."

Outside of the legal battle, Toshiba executives are said to be prioritizing potential bids from what would amount to a consortium of the New York-based private equity firm KKR & Co LP and a few Japanese government-backed investors representing Japan Innovation Network Corp. The Japanese government is said to be "keeping a close eye on the process," and would prevent any deal that could potentially transfer sensitive technological information to another country, namely Foxconn and its deep China ties.

Now, KKR and Japan Innovation Network Corp are preferred bidders, and are expected to enter a joint offer in the upcoming second round of bidding in mid-May. If the duo win exclusive rights to Toshiba's NAND chip unit, the technology would stay in Japan, appeasing the local government, and the new owners of the unit could aim for an IPO down the line.

The two new preferred bidders come after TSMC and Foxconn were originally reported as the main companies interested in Toshiba's chip unit, but TSMC eventually dropped out and then Foxconn faced troubled waters with the Japanese government. Last month, Apple was rumored as willing to spend several billion dollars to obtain a "substantial stake" in the Toshiba NAND chip unit, with enough of a share ownership to allow Toshiba's executives to retain partial ownership in Japan.

Other potential buyers include South Korea's SK Hynix, Amazon, Google, Broadcom, and more, who are all looking for a major foothold in the flash memory market that could allow them to compete with the likes of Samsung. The winning bidder is expected to be revealed sometime in June.


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Apple May Spend Several Billion Dollars to Obtain ‘Substantial Stake’ in Toshiba’s Memory Chip Business

Apple may spend several billion dollars to obtain a "substantial stake" in Toshiba's memory chip business, according to Japanese public broadcaster NHK. Reuters cited NHK as saying Apple's stake would be greater than 20 percent.


Given concerns from Japanese government officials about Toshiba selling "critical technologies" to overseas buyers, Apple would reportedly have Toshiba keep some shares so that the company retains partial Japanese ownership.

Apple is also considering teaming up with its manufacturing partner Foxconn, which is trying to acquire about 30 percent of the stake, the report said.

Foxconn allegedly offered Toshiba up to 3 trillion Japanese yen ($30 billion) as a standalone bid, but a subsequent report said Toshiba would likely reject the bid due to Foxconn's ties with China, where it operates multiple factories.

Apple's other manufacturing partner TSMC has reportedly already withdrawn its bid, while other potential suitors are said to include technology giants Amazon and Google and rival memory chipmakers SK Hynix and Western Digital. Apple itself was named as a potential bidder by a separate source earlier this month.

Toshiba announced plans to sell its NAND flash memory business in January in order to raise funds to cover write-down costs associated with its U.S. nuclear subsidiary Westinghouse Electric, which filed for Chapter 11 bankruptcy protection in March. The company expects to face $9 billion in related charges.

Apple dual sources 32GB, 128GB, and 256GB flash storage from Toshiba and SK Hynix for the iPhone 7 and iPhone 7 Plus.

Toshiba, facing an uncertain future, is supposedly expected to select the winning bidder of its memory chip business by June.

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Toshiba Expected to Reject Foxconn’s $27B Bid For Memory Chip Unit Due To China Ties

Early in March, Apple suppliers Foxconn and Taiwan Semiconductor Manufacturing Company announced their intention to bid for a stake in Toshiba's memory chip unit, which the company has put up for sale in an effort to offset a nearly $6 billion loss related to its overseas nuclear division. TSMC eventually dropped out of the race, leaving Hon Hai (Foxconn) as the highest bidder at nearly 3 trillion yen, or $27 billion.

Today, people familiar with the sale speaking to Bloomberg said that Toshiba is expected to reject Foxconn's lofty bid, mainly because of likely opposition from both the Japanese and American governments if Foxconn were to win Toshiba's memory chip business. Taiwan-based Foxconn has deep ties with China due to its numerous, large iPhone production facilities being located in the country, and those ties are expected to sit unfavorably with Japanese officials watching the bids on Toshiba's memory chip unit.


According to insiders, Toshiba sees a sale to Foxconn as an inevitable drag through regulatory approvals and delays, and is now willing to give "serious consideration" to lower bids.
Taiwan’s Hon Hai, which has indicated its willingness to pay as much as 3 trillion yen ($27 billion) for the chip unit, would face resistance because of its ties to China, said the people, asking not to be identified because the matter is private. That could drag out regulatory approvals and delay badly needed cash payments to Toshiba, raising the risks of such a deal, the people said. Hon Hai, the primary iPhone assembler for Apple Inc., has most of its factories in mainland China.
Next in line is said to be a potential offer of 2 trillion yen made by Broadcom, but current bids are non-binding and could change at any time, with the next round of bidding coming in the middle of May. The Japanese government is said to be "keeping a close eye on the process" and is expected to protect its interests in any sale that occurs with Toshiba.
On Tuesday, two senior officials, Chief Cabinet Secretary Yoshihide Suga and Industry Minister Hiroshige Seko, said Japan would protect its interests in any sale. “We are keeping a close eye on the process,” Suga said. “As a general principle, there would be a requirement to examine any deal under the foreign exchange law.”

The Japan government is organizing an alternative offer from Japanese companies that aims to inject 500 billion yen into the chips unit in exchange for a minority stake, one person said. Current bids are non-binding and could change. The deadline for the next round of bidding is mid-May, one of the people said.
Toshiba's likelihood in passing on Foxconn's bid is also said to be backed by a fear of the supplier's business methodology displayed during its acquisition of Sharp in 2016. In that process, the two companies originally agreed to a $6.2 billion takeover, but the final amount landed around $3.5 billion due to Foxconn's last minute bidding adjustment. Foxconn said the decision was based on discovering that Sharp had hundreds of billions of yen in "previously undisclosed liabilities," but the tactics are now said to make Toshiba "reluctant" to agree to Foxconn's bid.

Toshiba is also looking closely at a bid made by South Korea's SK Hynix, but the winning bidder isn't expected to be announced until June, ahead of Toshiba's next shareholder meeting.

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TSMC Drops Out of Race to Acquire Toshiba Flash Unit, Foxconn Highest Bidder

Taiwan Semiconductor Manufacturing Company (TSMC) has withdrawn its offer for Toshiba's highly sought-after NAND flash memory business, leaving major Apple supplier Hon Hai in the driving seat to acquire the unit.

Hon Hai, also known as Foxconn, has offered up the highest bid so far, with almost 3 trillion Japanese yen ($30 billion) said to be on the table, according to Japanese paper Asahi Shimbun on Friday. Shares in Toshiba jumped 7 percent on the news.


Toshiba is said to have narrowed down the number of bidders for its semiconductor business, which it is seeking to sell in order to raise at least $9 billion to cover U.S. nuclear unit charges that threaten the conglomerate's future.

Out of the initial 10 interested parties one of which was reportedly Apple, the smaller group of bidders includes Western Digital, Korea's SK Hynix, U.S. investment fund Kohlberg Kravis Roberts & Co, and a combined partnership bid from Silver Lake Management and U.S. chipmaker Broadcomm. Media reports made no mention of whether Apple made the cut, making the prospect seem unlikely.

Japan's government could oppose a sale to Taiwan-based Foxconn because of the strategic value of Toshiba's technology to the national interest, according to sources who spoke to Bloomberg. Toshiba reportedly wants to encourage Japanese companies to participate in the bidding process, since none are in the current group.

The second round of the bidding war is expected to be held before the end of May, with the winner is expected to be announced in June before Toshiba's next shareholder meeting.


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Apple, Google, Amazon Enter Race to Buy Toshiba NAND Flash Unit

Apple, Amazon, and Google are actively engaged in the bidding war to acquire Toshiba's NAND memory unit, according to a report by Yomiuri Shimbun Daily on Saturday (via Korean Herald).

According to the Japanese newspaper, there are now 10 bidders looking to buy Toshiba's lucrative semiconductor operation, which accounts for 20 percent of the NAND market. Nikkei reported on Friday that U.S. private equity firm Silver Lake and U.S. chipmaker Broadcom offered Toshiba about 2 trillion yen ($18 billion) for the unit. Other bidders include frontrunner and world's largest NAND flash maker, Western Digital, with Apple suppliers Foxconn and TSMC having been named early on as potential suitors.


"The US tech firms -- Apple, Google and Amazon -- have become the next attractive bidders following Western Digital as Toshiba can have stable supply chains (for smartphones or data servers) from them," an industry source told The Korea Herald.
On Thursday, Toshiba shareholders agreed to split off the NAND flash unit and sell it, in order to raise at least $9 billion to cover U.S. nuclear unit charges that threaten the conglomerate's future. Both Apple and Samsung are major clients of the unit, while Google and Amazon want to buy the NAND maker to supply their own data servers, rather than having to rely on chipmakers.

Prices on the flash memory market remain high, while Apple's interest in acquiring the unit has only increased as it continues to boost the storage capacity of its iPhones and iPads. Buying the unit would not only provide Apple with the ability to design and make its own flash memory, but it would also mean Samsung losing its main client. How much Apple's offer amounts to remains unknown, however.

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