Toshiba, Western Digital Reportedly Close to Settlement

Posted Date 12/11/17
Toshiba and Western Digital are nearing a settlement that end litigation between the firms which continues to be an obstacle to finalizing an $18 billion deal by Toshiba to sell its semiconductor business to a consortium led by private equity firm Bain Capital, according to a report by the Reuters news service.
The settlement — which has not been finalized — would give Western Digital the ability to participate in upcoming capacity expansions, including a new fab line at Toshiba's Yokkaichi Operations site and a greenfield fab planned for next year in Northern Japan, according to the report, which cites unnamed sources.
A deal would also extend the joint venture agreements between the two firms beyond 2021, when they start to expire, the report states.
Toshiba had taken steps to shut Western Digital out of investments in new capacity after Western Digital took legal steps to prevent the sale of the Toshiba chip unit. Western Digital maintains that joint venture agreements between Toshiba and SanDisk — which Western Digital acquired last year — require Toshiba to seek Western Digital's approval before selling its memory chip unit.
Western Digital had sought to acquire some or all of Toshiba's semiconductor business, but Toshiba prefered other bids, reportedly out of concern for Western Digital's ultimate stake in the business. The structure of the Bain-led consortium — which also includes Hoya Corp., the Innovation Network Corp. of Japan (INCJ) and the Development Bank of Japan — means that more than 50 percent of Toshiba's the business will be held by Japanese entities, something that both Japan and Toshiba's board pushed for.
However, the legal entanglements with Western Digital have proven to be a stumbling block for Toshiba in trying to close a deal with the Bain-led consortium. A settlement would presumably pave the way to close the deal.

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