U.S. chipmaker Western Digital Corp. has told Toshiba Corp. it may make a major concession by apparently pursuing taking a small portion of a stake in the Japanese conglomerate's chip business instead of exclusively purchasing the unit, sources close to the matter said Saturday.
Western Digital, Toshiba's U.S. joint venture partner in chip-making operations in Yokkaichi, Mie Prefecture, in central Japan, has objected to the sale of Toshiba Memory Corp. to bidders other than itself and demanded a preferential negotiation.
A plan to get Western Digital to join a Japan-U.S. consortium that includes the state-backed turnaround fund Innovation Network Corp. of Japan as a potential buyer has been floated, according to the sources.
Western Digital has already begun a behind-the-scenes arrangement with the Japanese Ministry of Economy, Trade and Industry, according to the sources, and a focal point would be to what extent it can formulate the plan before its executives visit Japan in June.
Toshiba, which is reeling from its worst-ever financial crisis, has been in the process of trying to sell a majority stake in Toshiba Memory in the hope of raising at least 2 trillion yen ($18 billion) to make up for huge losses in its nuclear business and eliminate negative net worth by next March to avoid getting delisted from the Tokyo stock market.
But Western Digital has been opposed to the sale of Toshiba Memory to a third party, claiming its right to veto as the joint venture partner. The U.S. firm had planned to offer 1.5 trillion yen through preferred shares, while asking the turnaround fund and the state-owned Development Bank of Japan to provide some 500 billion yen in cash for common equities so it can later acquire the common stocks from them.
However, the plan was likely to violate antitrust laws in such countries as China, and Toshiba President Satoshi Tsunakawa has apparently relayed the company's concerns to Western Digital CEO Steve Milligan at their meeting on Wednesday in Tokyo, possibly leading to a softening in the U.S. firm's stance.
Meanwhile, some people close to the matter remain cautious over Western Digital's participation in the government-led consortium as even a small amount of investment by the U.S. chipmaker, which holds the world's third-largest flash memory share, could meet challenges in clearing antitrust screenings in the countries concerned.
A total of four bidders, including U.S. investment fund Kohlberg Kravis Roberts and Taiwan's Hon Hai Precision Industry Co., remain as potential buyers. The Japanese turnaround fund is pursuing an alliance with KKR among others.
Earlier this month, Western Digital took legal action against Toshiba's plan to sell Toshiba Memory, asking the International Court of Arbitration of the Paris-based International Chamber of Commerce to block the sale.
