Toshiba fails to pick winner as three groups bid for chip unit

A logo of Toshiba Corp is seen on a printed circuit board in this photo illustration taken in Tokyo.

TOKYO (BLOOMBERG) - Toshiba Corp disclosed it's in talks with three consortiums for its memory chip unit and that it's still unable to make a final decision on a buyer.

There's one group that includes Western Digital Corp, a second that includes Hon Hai Precision Industry and a third comprised of Bain Capital, the Innovation Network Corporation of Japan and Development Bank of Japan. The board hasn't been able to choose a winner even though the company "exercised its best efforts to reach a mutually satisfactory definitive agreement with one of the consortia," Toshiba said in a statement on Thursday (Aug 31).

The Japanese electronics conglomerate has been negotiating for months to sell off its chips business and pay for multibillion-dollar losses in its US nuclear business. Although Toshiba identified the Bain-led group as the preferred bidder in June, the process has been complicated by legal action from Western Digital, which argues that it should have a say in any sale because of its partnership with Toshiba in the chips business.

Toshiba needs to raise the money by March to avoid being delisted from the Tokyo Stock Exchange. Any delay could result in it missing that deadline because of the time needed to get regulatory approval and close the deal.

"They need to come to an agreement in September to get all of the anti-trust approvals in place, but it's really beginning to feel like they don't really want to sell." said Hideki Yasuda, an analyst at Ace Research Institute. "They could still keep the business. If Toshiba is not so hung up on staying public, they can get delisted and still survive."

Any successful bidder would need to be able to pay enough cash to repair Toshiba's balance sheet and finance large capital investments in the chip business after the purchase, the Japanese company said in its statement. The buyer would also need to possess the ability to make decisions flexibly and quickly, it said. The Tokyo-based company said it's aiming to reach an agreement at the "earliest possible date."

Bain Capital had previously submitted a 2.1 trillion yen (S$25.82 billion) offer with INCJ and Development Bank of Japan. Western Digital is offering about 2 trillion yen, according to people familiar with the matter. Hon Hai founder Terry Gou has indicated his willingness to pay as much 3 trillion yen.

Apple is also wading into into the middle of the battle. The iPhone maker is in talks with Bain Capital, people familiar with the matter said this week. Apple depends on flash memory from Toshiba in its iPhones and iPods, and wants a continued supply so it's not dependent on rival Samsung Electronics.

In recent weeks, Japan's powerful Ministry of Economy, Trade and Industry had encouraged Toshiba to accept the offer from the Western Digital consortium, the people said, in an effort to end the litigation and reach a deal quickly. Top Toshiba executives and its deal advisers are resisting the current offer, arguing it doesn't do enough to protect the interests of the chips unit or the parent, the people said.

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