Toshiba agrees to give WD 2-week heads-up about flash memory biz flog-off
Court orders, stipulations and legal wrangling continues
Western Digital, which has dropped a preliminary injunction request, and Toshiba have agreed that Tosh will give WD at least 14 days' advance notice before closing any sale or transfer of its flash foundry joint venture interests, which won’t take place for many months.
Western Digital (WD) and Toshiba are in dispute over whether WD has veto rights over any sale or transfer of Toshiba’s interest in the flash foundry joint venture it operates with WD subsidiary SanDisk. Toshiba wants to sell the memory business owning this JV so as to recapitalise itself after devastating losses from its US nuclear power station-building business.
WD disputes its right to do this without WD’s consent, and has filed a case with an international arbitration court to sort it out, also file a preliminary injunctive relief claim in a California court to stop the sale until the arbitration court process has a come to a ruling.
The court in question is the Superior Court of California for the County of San Francisco and the case was a hearing about WD’s preliminary injunction request. The agreement idea was suggested by Judge Harold Kahn at a hearing earlier this month.
WD says: “The agreement, which has been officially entered by the Court as an order, protects SanDisk’s JV interests and preserves SanDisk’s consent rights until SanDisk’s request for further injunctive relief can be heard by the ICC International Court of Arbitration.”
It adds Toshiba has accepted the Court’s jurisdiction over Toshiba for purposes of enforcing this order.
However, WD has given up on getting an immediate injunction to try and halt the JV sale.
What did Toshiba have to say about this? Something somewhat at variance from WD’s take on it.
Toshiba’s view on consent right ownership concerning its memory business sale is: “this … does not …constitute any agreement by Toshiba that SanDisk has any consent rights over any sale of the shares of Toshiba Memory Corporation.”
It said the agreement with WD removes the need for further action by the court on SanDisk’s requests for a preliminary injunction.
Also Toshiba will publicly announce, within 24 hours, the signing of any agreement that contemplates a “Closing” (sale or transfer_) of its Memory Business, and this will apply until 60 days after an arbitration panel is formed. Toshiba has also agreed to notify SanDisk two weeks before such a closing takes place.
Toshiba is still intent on soon entering into a definitive agreement for the sale of its memory business with one of the bidders. Dr. Yasuo Naruke, a Toshiba senior EVPO, said: “We are very pleased to have reached thus mutually acceptable understanding which is effective for a very limited time … Nothing in thus agreement requires Toshiba to alter its position that there us no contractual requirement to seek SanDisk’s consent to the transfer if Toshiba’s memory business.”
“Further, as a practical matter, we don’t expect to close a deal during the period addressed by the order. Closing a transaction of this magnitude would require many months - well beyond the limited timeframe specified in the ruling.”
The arbitration court tribunal panel should be formed within the next month or so.
Stifel analyst and MD Aaron Rakers believes the arbitration process could take 16 - 24 months, and: “Western Digital is positively achieving its goal of maintaining status quo and moving the situation into an arbitration process - a process Toshiba arguably cannot afford given its timeline and financial situation.” ®