April 29, 2017 7:17 am JST

Japan rescue fund to lead joint bid for Toshiba chip ops

Alliance may expand to include state-backed bank, Western Digital

TOKYO -- The Innovation Network Corp. of Japan will orchestrate the expanding U.S.-Japan partnership for a joint bid for Toshiba's memory chip business, probably bringing on board some Japanese companies as well as Toshiba's American partner Western Digital.

The public-private fund's decision-making body met Friday to affirm plans to invest in the chip business in collaboration with U.S. private equity firm Kohlberg Kravis Roberts. The two have begun an asset appraisal of Toshiba Memory, with a hope of hammering out details of the investment before the second round of competitive bidding.

Business leaders in Japan and the Ministry of Economy, Trade and Industry have been pushing major domestic companies to buy, making the case for protecting Japanese technology. Based on an assumption that each company will contribute about 10 billion yen ($89.7 million), some companies appear to be considering it.

 "There are things we must consider in order to maintain Japan's industrial prowess and employment," said Fujitsu President Tatsuya Tanaka as he spoke at an earnings event Friday.

And Toshiba's American partner Western Digital, which jointly operates a key plant, is also considering joining the consortium.

CEO Stephen Milligan said at an earnings conference call Thursday: "We believe Western Digital is best positioned to lead and implement a transaction that will achieve the goals of all of Toshiba's stakeholders and we are working with them to develop a win-win solution. We have been communicating with key stakeholders and partners to evaluate a full range of potential alternatives to this challenging situation."

Western Digital seeks to "protect our interests with respect to any transaction involving the joint venture interests or assets, none of which could be completed without our consent," he stressed, in an apparent jab to third parties.

Now, the government-backed Development Bank of Japan is seen joining the consortium as well, with the aim of collecting a total of 2 trillion yen for the purchase. The consortium is increasingly likely to secure the deal.

Many players, many goals

With many varying interests crisscrossing around this deal, price will hardly be the only determinant of who will get to buy the business.

Toshiba wants to divest the business for a high price quickly; Western Digital would block a sale to a competitor; and the Japanese government wants to protect technology. And antitrust considerations in affected countries add to the complication.

Meanwhile, other bidders are still eager to grab the well-performing chip business. So some developments are expected before the dust settles eventually.

Hon Hai Precision Industry, also known as Foxconn, for instance, seeks to align this deal with U.S. President Donald Trump's efforts to repatriate manufacturing to America. Chairman Terry Gou visited the White house on Thursday and Friday to tout the idea of his Taiwanese manufacturing service company setting up a memory chip plant in the U.S. 

South Korea's SK Hynix has sent its top managers to Japan for a discussion with Toshiba leaders.  Broadcom of the U.S. is teaming with U.S. investment fund Silver Lake Partners to drive up the price.

(Nikkei)

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 9,869.72M
Shares: 4,237.6M

Fujitsu Ltd.

Japan

Market(Ticker): TKS(6702)
Sector:
Industry:
Technology Services
Information Technology Services
Market cap(USD): 15,208.2M
Shares: 2,070.02M
Asia300

Hon Hai Precision Industry Co., Ltd.

Taiwan

Market(Ticker): TAI(2317)
Sector:
Industry:
Electronic Technology
Computer Peripherals
Market cap(USD): 60,151.2M
Shares: 17,328.7M
Asia300

SK hynix, Inc.

South Korea

Market(Ticker): KRX(000660)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 37,088.6M
Shares: 728.00M

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