Apple reaches an agreement to final terms for Toshiba bid

by Benice BurgerSeptember 28, 2017

Apple Inc. has agreed to terms with Bain Capital in the private equity firm’s 2 trillion yen ($18 billion) bid for Toshiba Corp.’s memory chip unit, paving the way for a final agreement announcement as soon as Thursday, according to people familiar with the matter.

Apple is part of a consortium of partners Bain has assembled for the offer aimed at resolving a contentious auction that has stretched over eight months, said the people, asking not to be identified because the matter isn’t public. The formal announcement may slip given Toshiba’s track record of missing deadlines, they said. Dell Inc. and SK Hynix Inc. are also providing financial support.

Apple is interested in the chip unit because of the strategic importance of flash memory. The compact chips are essential for its iPhones and iPods, storing photos, video clips and phone numbers. Only a handful of companies make the highest-end technology and the dominant player is Samsung Electronics Co., a rival in smartphones that controls about 40 percent of the market for flash memory.

Toshiba is selling off its chips business to pay for billions of dollars in losses in its U.S. nuclear business. The company needs to raise the money by March to avoid seeing its shares delisted from the Tokyo Stock Exchange. Toshiba expects the deal to close by March 31 and aims to restore a positive net worth by the end of the fiscal year.

Seiji Ishibashi, a Toshiba spokesman, said the company is aiming to conclude the contract as soon as possible. An Apple spokesman did not respond to requests for comment outside normal business hours in California. Shares rose 1.7 percent in Tokyo trading Thursday.

The auction has been complicated by legal action from Western Digital Corp., which has argued it should have veto rights in any sale because of its partnership with Toshiba in the chips business. The Japanese company disputes that and sued Western Digital for interfering in the auction.

Toshiba said last week that its board had agreed to sell the chip unit to the Bain consortium. But Western Digital said that it would seek to block the sale and filed another request for arbitration. The U.S. company also warned Toshiba that legal proceedings against the planned sale of its memory chip business could drag on until 2019.

“We intend to continue our successful legal efforts into the binding arbitration process,” said John Hueston, counsel for Western Digital and partner at Hueston Hennigan.

KKR & Co., Bain’s rival in the chip bidding, tried to persuade Apple to switch sides, Bloomberg News reported this week. KKR and Western Digital had previously cooperated on efforts to buy the chips business and keep it from chip rivals such as Hynix.

Bain has been in discussions with Apple about more than financial terms for an investment. As the largest consumer of the type of chips that Toshiba produces, Apple is aiming to get the best deal on price and volume for a key component and has a vested interest in keeping the market competitive.


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Benice Burger