SK Hynix Decides on Investments for Toshiba Memory

Sep 28, 2017

SK Hynix held a board of directors meeting and decided on investments that will be made for Toshiba Memory. Toshiba held a board of directors meeting on the 20th of this month and announced that it is going to sell Toshiba Memory to South Korea-Japan-U.S. alliance that includes SK Hynix and Bain Capital.
Toshiba had been going back and from this alliance to WD (Western Digital) regarding sales of Toshiba Memory. However it cannot delay this process any longer. Experts explain that there is a high chance that Toshiba Memory will be sold to this alliance as long as there are not any huge variables.
SK Hynix held a board of directors meeting on the 27th and decided on an item regarding investments for Toshiba Memory. South Korea-Japan-U.S. alliance that includes SK Hynix is proposing to acquire Toshiba Memory for $17.5 billion (20 trillion KRW). SK Hynix is investing about $3.5 billion (4 trillion KRW) and $1.14 billion (1.3 trillion KRW) out of $3.5 billion will be invested as convertible bonds. After converting these bonds through legal process in the future, SK Hynix will be able to secure maximum of 15% of share rate in voting rights regarding Toshiba Memory. Rest of $2.36 billion (2.7 trillion KRW) will be invested as limited partners into a fund that will be created by Bain Capital and will allow SK Hynix to take capital gain when Toshiba Memory is listed.
Many businesses such as Toshiba, Hoya, Kingston, Seagate, and Dell including SK Hynix and Bain Capital are participating in this South Korea-Japan-U.S. alliance. Share ratios of voting rights between a consortium that has SK Hynix and Bain Capital participating, Toshiba, and Hoya are going to be 49.9%, 40.2%, and 9.9% respectively. Apple, Kingston, Seagate, and Dell will be making investments as private loan-type preferred shares.

Chairman Choi Tae-won of SK Group
<Chairman Choi Tae-won of SK Group >

Industry experts are predicting that the contract will be finalized this time. Toshiba had continuously changed its words as it selected South Korea-Japan-U.S. alliance that includes SK Hynix as the priority bidder in this past June and suddenly started negotiating with WD. However it cannot continue this tug-of-war any longer as it needs to finalize selling process by March of next year and resolve its status that has its liabilities exceeding assets. If not, it will be delisted and its creditors will suffer huge loss. Toshiba needs to repay $6.12 billion (7 trillion KRW) of debts by end of this month. If the final contract does not take place, it cannot delay deadline for its repayment any longer. “SK Hynix’s investment deal for Toshiba Memory is practically finalized.” said an industry expert.
“We expect that this investment will prepare a steppingstone for future partnerships that will increase our medium and long-term competitive edge by securing upper hands in technical and business aspects in NAND flash memory markets that have huge growth.” said SK Hynix.
Although SK Hynix is in the second place followed by Samsung Electronics in DRAM markets, its technologies and sales in NAND flash memory markets are dead last out of businesses that are participating in these markets. If this investment goes according to its plan, there will be many cooperation and exchange of technologies in variety of fields and this will improve SK Hynix’s competitive edge in NAND flash memory markets.
However some say that SK Hynix should not make any hasty decisions until the final contract is signed. On this day, WD announced that it will submit a temporary injunction to the International Chamber of Commerce’s International Court of Arbitration. Injunction is a system that seeks a quick court decision regarding an urgent matter. On the previous day, The Mainichi Newspapers reported that the official contract is being delayed as Apple raised objections towards important issues. As result, SK Hynix also added that it is making an effort to finalize the contract by March of next year to its announcement it made on this day.
Chairman Choi Tae-won of SK Group left to Japan for a business trip on this day. Although Chairman Choi was planning to leave the country to attend an annual banquet hosted by Korea Society that is going to be held in New York on the 28th, it is heard that he adjusted his schedule and decided to stop by Japan first. Industries predict that Chairman Choi is traveling to Japan in order to finalize the contract since his business trip to Japan is taking place right after the board of directors meeting that was held in the morning.
Staff Reporter Han, Juyeop | powerusr@etnews.com

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