WESTERN DIGITAL will reportedly offer 1.9 trillion yen ($17.4bn, £13.5bn) to take over Toshiba's memory business.
So says Reuters, which citing 'sources familiar with the deal' says that WD is throwing in 150 billion yen via convertible bonds, but isn't seeking voting rights in the business, with whom the company shares a 50 per cent stake in NAND flash manufacturing facilities in Japan.
Private equity firm KKR and two government linked organisations in Japan, which had been part of the Bain-led consortium, are also involved in the WD-led bid, along with a number of other Japanese companies.
KKR, Innovation Network of Japan and the Development Bank of Japan will each throw 300 billion yen into the bid, alongside investments of about 50 billion yen from other Japanese companies.
This will ensure that Japanese organisations maintain control of Toshiba Memory Corp with a stake of about 60 per cent, a move intended to allay Japanese government intervention in the sale.
Banking groups SMBC and Mizuho will also each extend about 700 billion yen in loans to get it over the line, while Toshiba will maintain a 100 billion yen stake in the business.
News of Western Digital's £13.5bn bid comes just a day after the firm pole position in the race to take over Toshiba's semiconductor biz, taking over a consortium led by Bain Capital
It became the frontrunner after talks between Toshiba and the preferred bidder stalled over payment schedules. Toshiba demanded payment upfront, whereas the Bain-led consortium, unsettled by the ongoing legal dispute between WD and Toshiba, wanted to stage payments.
According to Reuters, after the negotiations with the Bain-led consortium reached an impasse, Toshiba re-opened talks with other bidders, including Taiwanese electronics manufacturer Foxconn.
Japan's Nikkei business newspaper, meanwhile, claims that Toshiba CEO Satoshi Tsunakawa has told the company's lenders that it is now focusing on selling the unit to Western Digital with the aim of agreeing on a deal by the end of August.
Now, though, Toshiba has swallowed its pride and prioritised talks with Western Digital: Toshiba needs to sell its flash memory business for about $18bn in order to cover catastrophic losses incurred by its bankrupt US nuclear power station business Westinghouse.
Toshiba needs to push through the sale before the end of its financial year in March 2018 or risk having its shares delisted from the Tokyo Stock Exchange on financial grounds.
The Bain-led consortium also includes Development Bank of Japan and the Innovation Network Corp of Japan, a government-backed group, with South Korean semiconductor firm SK Hynix providing funding that it would no doubt turn into an equity stake at a later date.
Western Digital has drastically upped its original low-ball bids to more-or-less meet Toshiba's target price of two trillion yen (around $18bn). According to Reuters, in order to help fund the acquisition, it would also bring in private equity firm KKR & Co and the two Japanese organisations that are also part of the Bain-led consortium.
Western Digital co-owns NAND flash manufacturing facilities in Japan with Toshiba Memory Corporation, the business that Toshiba is currently auctioning off. Western Digital picked up the stake when it acquired SanDisk, a partner with Toshiba for 17 years, for $19bn in May 2016.
The cost of that deal, though, also meant that Western Digital has struggled to raise the funds to match other bidders in the auction process. µ
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