WDC flashes the cash in in Tosh Memory biz bid: 2 treeellion yen

Partners with state-backed Japanese funds

+Comment WDC is partnering with a state-backed Japanese fund and bidding ¥2 trillion ($17.9bn, £13.8bn) to buy Toshiba’s Memory Business.

Two days ago, WDC had no skin in the second bidding round game but was rumoured to be setting up some kind of deal. It has joined with the Innovation Network Corp. of Japan (INCJ), one of the second round bidders to construct its bid.

The Japan Times says Toshiba’s president, Satoshi Tsunakawa, will meet WDC CEO Steve Milligan today to discuss the bid. WDC has filed for an international arbitration court to uphold its veto rights on any Toshiba Memory Business sale.

The financial mechanics have WDC putting up ¥1.5 trillion in convertible preferred shares with the INCKJ and the Development Bank of Japan putting in ¥500 billion for an equity share. WDC will set up a company specifically to buy the memory business and purchase the equities some years later.

Reports says regulatory approval would not be a problem for WDC’s bid but Toshiba is reportedly wary of WDC’s offer.

In a separate report by the Korea Herald, Park Jung-ho, SK Telecom CEO, said he’d been working for two years on a deal to buy Toshiba’s memory business. SK Hynix, involved in the Bain bidding group, is part of the SK Group, as is SK Telecom.

+Comment

It’s tempting to see the arbitration court play as WDC’s stick and the ¥2 trillion bid as its carrot. No doubt WDC hopes the combination will provide the means to beat Hon Hai’s 50 per cent higher ¥3 trillion bid for Toshiba's Memory Business, together with Japanese government concerns about that bid opening the way for intellectual property and jobs to find their way into China.

WDC’s stick plus carrot could also be the way to sidestep competing Bain and Broadcom bids of around ¥2 trillion each.

If the WDC bid succeeds, then Milligan's company will become second to Samsung in NAND foundry output and another major step in NAND production supplier consolidation will have been taken. That could prompt SK Hynix to think about its stand-alone future. ®

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