South Korea-U.S.-Japan consortium, which includes SK Hynix, was selected as the preferential bidder in acquiring Toshiba Memory. Toshiba Memory is the number two flash memory manufacturer in the world. It is expected that SK Hynix will make a giant leap into global markets for flash memories by bringing in Toshiba Memory as its ally.
Toshiba held a board of governors meeting on the 21st and selected South Korea-U.S.-Japan consortium as the preferential bidder in acquiring Toshiba Memory, which is Toshiba’s semiconductor subsidiary. Toshiba submitted official documents on this day and announced that South Korea-U.S.-Japan consortium had the superior offer after evaluating possibilities of technology leaks to foreign countries and promise to keep current employees from Toshiba Memory.
This consortium is composed of Bain Capital from the U.S., SK Hynix from South Korea, Innovation Network Corporation of Japan (INCJ), which is a government and private fund supported by Japanese Government, and Development Bank of Japan. It is heard that this consortium has a fund worth about $18.0 billion and it is planning to establish SPC (Special Purpose Company) in the future and obtain 100% of Toshiba Memory’s shares. Toshiba is going to discuss about detailed terms on sales of Toshiba Memory, sign off on a formal contract during a meeting of shareholders which is going to be held on the 28th of this month, and finish off this process by end of March of 2018.
It has not been determined yet on how much Toshiba Memory’s shares each business from this consortium is going to take. According to industries on Japanese reports, INCJ and Development Bank of Japan are going to take majority of shares and take control of Toshiba Memory. It is likely that Bain Capital and SK Hynix are going to invest about $2.62 billion (3 trillion KRW) each and secure about 15% of shares each. It is predicted that SK Hynix will participate in this consortium by loaning funds to SPC. It seems that SK Hynix is taking this approach in order to avoid monopolistic evaluation that will take place due to combination of businesses.
Biggest obstacle in acquiring Toshiba Memory will be Western Digital that filed a suit through International Court of Arbitration in order to stop Toshiba from selling Toshiba Memory. Western Digital co-manage semiconductor factory with Toshiba. Although it is heard that Western Digital partially agreed to a proposal that will have Western Digital to acquire company stocks after Toshiba Memory is sold and to invest into Toshiba Memory indirectly, it has not made up its final decision yet.
On this day, Western Digital issued a statement and took a strong opposing stance by saying that Toshiba is continuing to ignore approval from SanDisk. Also it argued that Toshiba does not have a right to transfer profits from its joint venture with Toshiba to a third party without any agreement from SanDisk. It announced that it is confident in SanDisk’s approval and legal status regarding Toshiba and left a possibility that this might lead to a legal battle in the future.
Toshiba was looking to sell its memory semiconductor business since early this year in order to recover from loss of $6.12 billion (7 trillion KRW) that it took from nuclear business. In order to recover from this loss, it divided its memory semiconductor business and established an independent corporate called Toshiba Memory. Variety of groups such as a group of Broadcom and Silver Lake from the U.S. and Hon Hai Group from Taiwan competed to acquire Toshiba Memory. Broadcom-Silver Lake consortium was the primary candidate based on simple terms as it suggested paying $19.8 billion in order to acquire Toshiba Memory. However Japanese Government did not want to sell entire Toshiba Memory to a foreign capital. This is why an alliance formed between South Korea, the U.S., and Japan with help from Ministry of Economy, Trade and Industry was selected as the preferential bidder in acquiring Toshiba Memory. Although Hon Hai Group suggested whopping $26.9 billion to acquire Toshiba Memory, it was eliminated early as a candidate due to possibilities of technology leaks to China.
South Korean semiconductor industries expect that SK Hynix will be able to strengthen its relationship with Toshiba even more by indirectly participating in a consortium.
“Greatest achievement of SK Hynix is stopping entire memory semiconductor technologies from Toshiba, which possesses original technologies in NAND flash memories, going to American or Chinese capitals and strengthening its current relationship with Toshiba even more.” said a high-ranking official from a South Korean semiconductor industry.
Staff Reporter Han, Juyeop | powerusr@etnews.com