Toshiba sues Western Digital over chip-unit sale

TOKYO • Toshiba yesterday sued Western Digital in a Japanese court, asking for 120 billion yen (S$1.5 billion) in damages and seeking to stop the US company from interfering in the sale of its chip unit, escalating a legal tussle between them.

The litigation seeks to stop Western Digital from making ownership claims over the enterprise that Toshiba is trying to sell. The Japanese company said Western Digital's employees improperly obtained proprietary information.

The relationship has gotten more acrimonious as Toshiba moves towards a sale of the flash memory division. Last month, Western Digital invoked an arbitration clause in their business agreement, seeking to block Toshiba's transfer of ownership of the unit to a separate legal entity in preparation for a sale.

Toshiba, which has reversed that transfer, then demanded the US firm stop its "harassment" as Toshiba tries to sell the business.

"Toshiba has made very clear (it wants) to move the process along without Western Digital's obstruction, which, frankly, hasn't been... constructive," said Macquarie Group analyst Damian Thong.

The US firm says Toshiba needs its consent to complete the sale.

The escalating standoff over the chip sale could disrupt Toshiba's plans to use cash from the divestment to plug a hole in its balance sheet from a massive loss in its nuclear power business.

Last week, Toshiba said a group led by Japan's Innovation Network, Bain Capital and other investors were the preferred bidders for the chip business, and that it was aiming to reach final agreement and close the deal by next March. The consortium is offering 2.1 trillion yen for the unit, sources said.

Toshiba argues that Western Digital did not formalise their tie after it became a manufacturing partner in the flash memory business when it bought SanDisk for US$15.8 billion (S$22 billion) last year.

It also says it will start blocking Western Digital's access to information in the joint venture, in order to protect its trade secrets. Toshiba's claims for damages include the loss of information, as well as for interfering in the sales process.

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A version of this article appeared in the print edition of The Straits Times on June 29, 2017, with the headline 'Toshiba sues Western Digital over chip-unit sale'. Print Edition | Subscribe