May 12, 2017 3:30 am JST

Toshiba may extend bidding deadline for memory unit

Alternate option arises for cash-strapped conglomerate's crown jewel

A Toshiba chip fabrication facility in Yokkaichi, Japan.

TOKYO -- Toshiba is considering pushing back the deadline for the second round of bidding for its memory chip operations, with a two-step sale surfacing as an option.

About 10 potential buyers submitted offers for Toshiba Memory in the first round of bidding that ended in late March. The Japanese conglomerate has since narrowed the field to about five individual and joint bids. The remaining candidates include U.S. private equity fund Kohlberg Kravis Roberts in partnership with the public-private Innovation Network Corp. of Japan, South Korean chipmaker SK Hynix, Broadcom of the U.S., Taiwanese contract manufacturer Hon Hai Precision Industry and Western Digital, which works with Toshiba on chip production.

Toshiba, which values its memory operations at 2 trillion yen ($17.5 billion) or more, plans to pick a winner in this round after presenting detailed financial and other information to the bidders. The May 19 deadline could be moved to later in the month, or even into June or beyond if due diligence by potential buyers drags on too long.

The conglomerate may be awaiting a Japanese bid. Plans call for business groups and others to assemble an all-Japanese consortium, with each participant putting up a relatively small stake, but the alliance has yet to take shape.

Toshiba also needs time to handle its dispute with Western Digital. The American hard drive maker demanded in early April that its Japanese partner halt the sale immediately and grant Western Digital exclusive negotiating rights. Toshiba's response included a threat to restrict access to their jointly run chip fabrication facilities. A meeting Wednesday between Western Digital CEO Stephen Milligan and Toshiba President Satoshi Tsunakawa failed to resolve the dispute.

With the potential for a drawn-out antitrust review, a plan under consideration would have the KKR-INCJ alliance initially purchase Toshiba's chip business, and then sell a portion of the stock over time to a company in the industry. The sale to a fund, rather than a competitor, would have an easier time passing the scrutiny of regulators. And given its goal to pull out of negative net worth by March 2018, Toshiba would be likely to accept the arrangement.

Meanwhile, Western Digital's Milligan also met officials from the Ministry of Economy, Trade and Industry during his trip to Japan to discuss the negotiations. Some observers speculate that the U.S. company, which aims to mend ties with Toshiba, is likely to accept an initial sale of Toshiba's chip business to the KKR-INCJ alliance.

(Nikkei)

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 9,869.72M
Shares: 4,237.6M
Asia300

SK hynix, Inc.

South Korea

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

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