Toshiba selects Bain group as buyer of prized chip business

REUTERS: Japan’s embattled Toshiba Corp has chosen a group led by U.S. private equity firm Bain Capital to buy its prized memory chip unit, three people with knowledge of the talks said this week, a last-minute dramatic twist to a highly contentious auction.

But it’s unclear whether the decision by Toshiba’s board will mean the sale will now proceed smoothly, as rival suitor Western Digital Corp has initiated legal action, arguing no deal can be done without its consent due to its position as Toshiba’s joint venture chip partner.

The Bain-led offer for the world’s No. 2 producer of NAND semiconductors is worth some US$22 billion, sources have said.

It has partnered with South Korea’s SK Hynix Inc and brought in U.S. buyers of Toshiba chips such as Apple Inc and Dell Inc to bolster its bid. Memory product maker Kingston Technology and data storage firm Seagate Technology Plc are also part of the group.

The make-up of the consortium could spell trouble ahead, said Hideki Yasuda, an analyst at Ace Research Institute.

“The large number of stakeholders could complicate decision-making and slow down key investment decisions,” he said, adding that the participation of Toshiba clients would also sap the ability of the chips business to negotiate competitively on pricing.

Bain’s win, first reported by Reuters, has been hard fought as wrangling went down to the wire and late on Tuesday the Western Digital-backed consortium, which includes KKR & Co LP , appeared to be in the lead, sources said.

But the California-based firm would not agree to limits to any future stake in the chip business that had been demanded by Toshiba, said one person briefed on the matter.

A separate source said that an official announcement by Toshiba on the deal had been held up as the Japanese firm was still waiting for commitment letters from all of the Bain consortium members.

Sources declined to be identified as they were not authorised to speak about discussions on the sale.
Toshiba declined to comment. A representative for Bain was not immediately available for comment while SK Hynix declined to comment.