TOKYO -- The chiefs of Toshiba and U.S. memory partner Western Digital will meet face to face as soon as this month, it was learned Monday, seeking to break a deadlock over the Japanese conglomerate's urgent effort to find a buyer for its chip memory unit.
Western Digital CEO Stephen Milligan plans to come to Japan for talks with Toshiba counterpart Satoshi Tsunakawa and figures including officials from the Ministry of Economy, Trade and Industry. Other executives from Western Digital have already arrived and are reopening negotiations.
Tsunakawa is expected to ask the American company to drop its lawsuit opposing the sale of the memory unit to any third party without its consent. Milligan, for his part, probably will seek to make Western Digital part of the consortium to which the unit is ultimately sold.
Need for compromise
Western Digital has stood firm, but if it does not back down, it risks taking a hit to the value of memory company Sandisk, which it bought last year for close to $19 billion, and with which Toshiba has formed joint ventures. So compromise is in its best interest in order to avoid losses.
Toshiba faces pressure from creditors to choose a buyer this month. It needs to sell by the end of March to wipe away massive negative net worth in time to remain listed on the Tokyo Stock Exchange, but clearing any deal under antitrust laws in relevant countries probably will take six to nine months.
Western Digital's lawsuit, however, complicates Toshiba's efforts to sell to the preferred bidder it selected in June -- a consortium led by the Innovation Network Corporation of Japan and U.S. investment fund Bain Capital, and including parties such as South Korea's SK Hynix. Trouble also arose over what form consortium members' investments would take.
Toshiba's leadership has told creditors it will focus on compromising with Western Digital. It may offer to instead make its preferred bidder the group led by Western Digital and U.S. private equity firm Kohlberg Kravis Roberts. It may also seek other solutions, including adding Western Digital to its currently preferred consortium.
It has become increasingly unclear whether Toshiba will be able to tie up negotiations among the multiple interested parties to choose a buyer within the next 10 days. Negotiations among the main parties are approaching final stages as the end of August looms.
The deadlock in sale talks also led Toshiba to reopen talks with another potential buyers' group led by Taiwan's Hon Hai Precision Industry, better known as Foxconn, a key Apple supplier.
Going ahead with the U.S.-Japan-South Korea bidding consortium is highly risky due to Western Digital's lawsuit. Selling to Foxconn would also be difficult, as the government opposes letting semiconductor technology slip out of Japanese hands. Thus, barring some breakthrough, the stalemate continues.