Toshiba sells memory division to consortium with SK Hynix, Apple and Dell

Toshiba has decided to sell all shares of its nand memory manufacturing business to a consortium led by investor Bain and SK Hynix. Western Digital is now fishing behind the net and is expanding its pending legal proceedings against Toshiba.

Toshiba reports that a total of almost 15 billion euros is involved in the acquisition. The shares will be bought by a company created specifically for the acquisition, called Pangea. Toshiba is going to invest approximately 2.6 million euros in Pangea, to ensure a stable transfer of ownership. More financial details will be announced once the share transfer is completed.

Toshiba has not said what share the parties involved will receive in the new company. On Wednesday, Bloomberg reported based on an anonymous source that Bain, Toshiba, SK Hynix and the Japanese Hoya will receive shares worth around seven billion euros. Other participants in the consortium, namely Apple, Dell, Kingston and Seagate, would acquire shares worth approximately 3.3 billion euros.

Western Digital is not happy with the upcoming share transfer and said it is worrisome that Toshiba is pushing through this transaction without SanDisk’s approval. Toshiba worked with SanDisk in a joint venture until WD acquired SanDisk last year. WD has also said it will start another legal arbitration case. This case concerns Toshiba’s unilateral decision of August 3 to invest in a new flash memory production line within the joint venture. Western Digital wants this banned until SanDisk gets a chance to invest in it.

Toshiba and Western Digital have been engaged in a legal battle over the acquisition of the memory division for some time, with the companies accusing each other. For example, WD previously went to an arbitration committee to prevent Toshiba from selling the chip division. Western Digital wants to continue this procedure. According to Toshiba, the share transfer to Pangea can go ahead regardless of the outcome of any legal proceedings surrounding the interests in the joint venture.

Japan’s Toshiba will still control the spin-off memory division, but the consortium and Toshiba have agreed that certain restrictions have been placed on Toshiba so as to preserve the value of the new company’s technology and allow management to operate independently.

The Innovation Network Corp of Japan, a public-private partnership between the Japanese government and major technology companies, and the Japanese Development Bank, are also part of the consortium. These two Japanese parties would be interested in investing in the memory division as well. According to Toshiba, these are two neutral, independent organizations. To ensure the independence of the new company, the Japanese Government Fund and the Japanese Development Bank will exercise Toshiba’s voting rights in Pangea under certain conditions.

Earlier, these two Japanese government parties called on Toshiba and Western Digital to end the legal disputes. Japan’s trade minister has done the same. The Japanese government would like to keep production in Japan, given the strategic value of chip production for future Japanese technology.

Toshiba spun off its nand memory production on April 1 into a separate company called Toshiba Memory, and has been looking to sell this part for some time, as it is in financial trouble after a series of setbacks at Toshiba’s US nuclear unit Westinghouse. After Samsung, Toshiba is currently the world’s largest manufacturer of nand memory.