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Toshiba seeks shareholders' blessing for memory sale

Western Digital launches new salvo in legal battle

Construction of the new Fab 6 proceeds apace at Toshiba's Yokkaichi chip fabrication complex.

TOKYO -- Toshiba hopes to speed along the sale of its flash memory unit by putting the proposal to shareholders at a meeting next month, even as partner Western Digital looks to disrupt the process with another arbitration request.

Thursday's announcement of the extraordinary shareholders meeting on Oct. 24 listed three proposals up for consideration, including the pending agreement to sell Toshiba Memory to a Japanese-American-South Korean consortium led by U.S. investment firm Bain Capital.

Shareholders will also be asked to approve earnings for the fiscal year ended last March, which were delayed by a dispute between Toshiba and its auditor regarding the massive losses on U.S. nuclear operations that have forced the Japanese conglomerate to sell the memory unit.

The third proposal is a slate of 10 board directors. The list includes two new faces while dropping Toshiba Memory President Yasuo Naruke, who handled negotiations over the memory unit's sale. Toshiba intends to name outside director Yoshimitsu Kobayashi as chairman in place of Shinzo Maeda.

But while Toshiba races to get the memory unit sale underway, Western Digital is hardening its opposition. The U.S. hard-drive maker said Thursday that it filed another arbitration request with the ICC International Court of Arbitration, seeking an injunction to block Toshiba from investing unilaterally in a Japanese chipmaking complex in which the two companies jointly invest.

The joint venture agreement covering the new facility in question gives Western Digital subsidiary SanDisk, Toshiba's original partner, the "right to participate" in such capital spending, the hard-drive maker argued. It called the solo investment plans a "retaliatory breach" of the contract.

Western Digital filed an arbitration request in May in a bid to bar Toshiba from selling its flash memory operations, asserting that any transfer without its consent violated joint venture agreements. The aim of Thursday's request is to get in the way of the planned sale.

Major Toshiba lenders Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp., Mizuho Bank and Sumitomo Mitsui Trust Bank had decided by Thursday to provide a total of 600 billion yen ($5.34 billion) in financing to the special-purpose company set up to buy Toshiba Memory. This accounts for 30% of the 2 trillion yen purchase price.

Toshiba held a briefing for lenders Thursday to explain its decision to opt for the Bain-led bid. It also sought to persuade banks to renew credit lines totaling 680 billion yen set to expire at the end of the month. Lenders had threatened not to do so if Toshiba failed to choose a buyer by then.


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