KKR, Bain and Broadcom eyeing Toshiba chip unit

Toshiba, which values its chip unit at about  S$25 billion, was forced to put its prized asset on the block this year.
Toshiba, which values its chip unit at about S$25 billion, was forced to put its prized asset on the block this year.PHOTO: AFP

TOKYO • Suitors including private equity firms KKR and Bain Capital and US chipmaker Broadcom are lining up for Toshiba's semiconductor business, sources familiar with the matter said ahead of a deadline for second-round offers yesterday.

Broadcom, which has teamed up with private equity firm Silver Lake, and Bain, which has partnered with South Korean chipmaker SK Hynix, will participate in the second round, the people said.

It was not clear if KKR and its partners would submit their offer by the end of the day.

Toshiba, which values its chip unit at about 2 trillion yen (S$25 billion), was forced to put its prized asset on the block this year, after dramatic cost overruns at its now-bankrupt US nuclear unit left it scrambling for cash.

Selling the unit is critical for the company's recovery. However, much of the sale and its outcome are uncertain, as Toshiba's business partner Western Digital, which jointly runs Toshiba's main semiconductor plant and is one of the suitors for the unit, is seeking to block any sale that does not have its consent.

KKR is expected to be one of the most favoured bidders.

It is set to join hands with state- backed fund Innovation Network Corporation of Japan in an offer of at least 1.8 trillion yen, one person said, adding that the bid could be raised.

The government has made clear that it is prepared to block any sale that could see highly valued chip technology leave the country, and the participation of government-backed investors is seen as a key stamp of approval.

Bain plans to bid about 1.5 trillion yen for a majority stake, two of the sources said, declining to be identified as talks were confidential.

Bain's offer will allow Toshiba and the management of the memory chip business to own a sizeable holding in the chip unit, the people added.

SK Hynix is not expected to take a leading role in the offer, owing to anti-trust concerns. It said it has decided to bid for Toshiba's memory chip business as part of a consortium and did not disclose further details.

The consortium of Broadcom and Silver Lake was the highest bidder in the first round of the auction with an offer of 2.5 trillion yen, a person briefed on the matter said.

Taiwan's Foxconn has formed a consortium with Japanese partner Sharp to bid in the second round, other people with knowledge of the matter said. Foxconn and Sharp declined to comment.

Toshiba is also open to entertaining new bids after the second round closes, a person with knowledge of the matter has said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 20, 2017, with the headline 'KKR, Bain and Broadcom eyeing Toshiba chip unit'. Print Edition | Subscribe