Toshiba Sells NAND Chip Unit For £13.5bn

Troubled Japanese conglomerate Toshiba is to sell a large part of its NAND chip unit to a consortium led by Bain Capital LP.

The deal is worth $18bn (£13.5bn) and it should give the firm vital breathing room, as it struggles to contend with a possible delisting from the Tokyo Stock Exchange as well as a bitter legal tussle with Western Digital.

Toshiba has been under intense pressure ever since early 2015, when it was discovered that it had overstated operating profits by a total of 151.8 billion yen (£780m).

Even worse, the CEO of Toshiba was found to have been aware of a profit inflation scheme going back to 2008. The CEO and a number of other executives resigned as a result.

Storage Deal

But now Toshiba has reached an agreement with the consortium that includes Bain Capital, Apple, SK Hynix, Dell, Seagate Technology and Kingston Technology.

The Toshiba unit is the world’s second biggest producer of NAND chips.

These chips are hugely important, as NAND flash memory is commonly used as a storage medium in many electronic devices thanks to the fact it does not require power to retain data.

Agreement to sell the unit was reportedly only reached last week after Apple had demanded new terms on chip supply.

Under the terms of the deal, and in an effort to satisfy Japanese authorities, Toshiba along with a number of other Japanese firms such as Hoya Corp, will retain a more than 50 percent in the unit.

Indeed, Toshiba will hold 40.2 percent of voting rights in the chip unit and Hoya will own 9.9 percent, while other members will hold a combined 49.9 percent.

Protracted Problems

The deal is good news for Toshiba’s senior management, as the firm is under pressure from a possible delisting from the Tokyo Stock Exchange, due to liabilities at its now bankrupt nuclear unit Westinghouse, as well the accounting scandal.

All of these issues mean that Toshiba is likely to end a second consecutive year in negative net worth, despite it offloading various other non-core divisions in recent years.

And it should be remembered that Toshiba remains locked in a highly bitter legal battle with American storage rival Western Digital, its chip venture partner thanks to its acquisition of SanDisk in 2015.

Western Digital is seeking an injunction to block any deal that does not have its consent.

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