Toshiba agrees to sell chips unit to Bain Group
Toshiba Corp’s board has agreed to sell its flash memory chip unit to a group led by Bain Capital, according to a person familiar with the matter, ending a contentious bidding process that stretched over eight months.
The Bain consortium includes backing from Apple and Dell, people familiar with the matter have said. The iPhone maker played a crucial role in swinging momentum in the auction to the Bain offer and plans to contribute capital, said the people.
The Bain group had previously offered 2.1 trillion yen ($19 billion) for the unit, people familiar with the matter said.
The Bain-led group was identified as a preferred bidder almost three months ago, but the process has been delayed by lawsuits, government opposition and corporate indecision.
Toshiba’s chose Bain over a group led by KKR & Co. and two state-backed funds, Innovation Network Corp of Japan and Development Bank of Japan.
To complete the sale, Toshiba may have to overcome resistance from joint venture partner Western Digital Corp.
Toshiba is selling off its chips business to pay for losses in its US nuclear business. The company needs to raise the money by March to avoid seeing its shares delisted from the Tokyo Stock Exchange.
The auction has been complicated by legal action from Western Digital, 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 more than $1 billion for interfering in the auction.
The auction has gone through dizzying twists and turns. Last week, Toshiba signed a memorandum of understanding with Bain, with the goal of reaching a final deal before the end of the month.
But the MOU didn’t preclude Toshiba from continuing to negotiate with other bidders.
This week, KKR and INCJ worked on a revised bid, with the Japan fund taking a more prominent role in the consortium and planning an initial investment of about 550 billion yen ($4.9 billion), up from the previous 300 billion, people familiar with the matter said.
Under the revised proposal, Toshiba could buy back equity from INCJ and DBJ later, the people said.
Bain then revised its offer too. The US buyout firm sought more financial support from Apple, asking for about $7 billion in capital, up from a previous agreement for about $3 billion, said a person familiar with the matter.
It’s not clear exactly how much capital Apple will ultimately contribute to the offer.
Read: Apple discussing $3 billion stake in Bain’s Toshiba bid
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