Japan-US team, Broadcom lead race for Toshiba Memory
Western Digital may join alliance including Japanese state-backed institutions
TOKYO -- The battle to acquire Toshiba's memory unit is entering its final stages, with a Japanese-American consortium -- potentially including Toshiba partner Western Digital -- and a team led by U.S. chip company Broadcom emerging as the two front-runners.
Western Digital CEO Steve Milligan has called for an alliance between the American hard-drive maker and Japanese institutions, including the public-private Innovation Network Corp. of Japan and the government-backed Development Bank of Japan, out of consideration for the Japanese side's concerns. Western Digital will continue investing in joint chipmaking operations with Toshiba in Japan, including building a new plant and preserving engineers' jobs, he said Tuesday.
Milligan will visit Japan soon to continue negotiations with Toshiba.
Western Digital has butted heads with Toshiba over the Toshiba Memory sale. It refused to approve any transfer of the operations to another company and insisted on a controlling stake, a demand on which it has recently softened. The American company reportedly also plans to raise its total offer, including contributions from partners, to Toshiba's asking price of around 2 trillion yen ($18.3 billion) from about 1.8 trillion yen.
If Western Digital joins the Japanese team, Kohlberg Kravis Roberts of the U.S. could participate as well. The Japanese government, worried about the prospect of Toshiba technology leaving the country, likely supports this alliance given the heavy Japanese involvement.
Meanwhile, the Broadcom camp is believed to have submitted a bid of more than 2 trillion yen. Since Broadcom is not in the memory business, a deal would likely clear antitrust reviews quickly. This is a plus for a Toshiba hoping to complete the sale by the March 2018 end of its fiscal year so that it can rebuild its finances after heavy losses on American nuclear operations. Tokyo would likely accept the sale of Toshiba Memory to an American company, since its main concern is with technology leaking to China.
Other participants in the second round of bidding -- including Taiwanese contract manufacturer Hon Hai Precision Industry, said to have made the largest offer, and Bain Capital of the U.S. -- are looking to catch up or team with other partners. Toshiba plans to pick a buyer this month.