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Toshiba memory unit drama alert: SK Hynix chips into Japanese consortium bid

WDC could be out on its arse

Three CEO chairs

Korean chipper SK Hynix is joining a Japanese state fund-led consortium to bid for Toshiba's memory business, and WDC could be out.

The background to this bewildering and lightning fast game of musical chairs is that Toshiba is selling its NAND chip and SSD-making unit for at least ¥2tn ($18bn) to recover from cost overruns at its bankrupt Westinghouse Electric US power station building business.

Toshiba has declared a ¥950bn ($8.6bn) loss for the fiscal year ended 31 March. Auditors PWC didn't sign off on this and have since been dismissed.

It's also agreed to contribute $3.68bn to the building of two nuclear power stations in Georgia and is talking about contributing to one in South Carolina.

Reuters reports that the consortium, led by the Innovation Network Corp of Japan (INCJ) and supported by the Development Bank of Japan (DBJ), could include SK Hynix, a rival to WDC.

WDC would participate via a debt purchase instead of buying equity, and so hope to avoid any delays to the bid caused by antitrust investigations. However, in this melting pot of alliance building, WDC may no longer be part of the INCJ bid.

The Asahi Shimbun reports (via Google translate) that the INCJ is setting up a Special Purpose Company (SPC) to bid for the memory business and this does not include WDC.

The SPC would have ¥300bn ($2.7bn) from INCJ, ¥300bn from Bain Capital, ¥100bn ($907m) from Toshiba, and another ¥140bn ($1.2bn) from other Japanese companies. SK Hynix would punt ¥300bn, and US private equity fund KKR could provide ¥200bn ($1.8bn). Lastly ¥400bn ($3.6bn) would come from the Bank of Tokyo-Mitsubishi UFJ.

That totals ¥1.7tn ($15.4bn); well short of Toshiba's ¥2tn threshold. So WDC could still contribute to this bid group to reach Toshiba's threshold.

A rival ¥2.2tn ($20bn) bid comes from a Broadcom-led consortium and another from Foxconn (Hon Hai Precision Industry). The Japanese government does not favour this bid because of the possibility of IP and job leakage to China, where Foxconn has manufacturing operations.

The Nikkei reports that Dell and Kingston Memory are joining the Foxconn bidding consortium, along with Apple and Amazon.

Toshiba flash chips are used in the iPhone.

Hon Hai chairman Terry Gou told the Nikkei: "It is easier for us than anyone else to pass the antitrust review. We don't have a semiconductor business and we are confident we can complete the antitrust review in six months." Any review involving WDC could take longer.

This high-stakes corporate soap opera continues. ®


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