decor decor
"Only those who will risk going too far can possibly find out how far one can go."

-T.S. Eliot

Toshiba to Sell Chip Unit to Bain Consortium

Financial Information
  • Enterprise Value                                            ¥2T (~$18B)
Transaction Facts
  • Toshiba has agreed to sell its chip unit Toshiba Memory Corporation to a consortium led by private equity firm Bain Capital. Under the agreement proposed on Wednesday’s board meeting, Bain, Toshiba, South Korea’s SK Hynix and Japan’s Hoya will pay ~$8B for common and convertible stock, while Apple, Dell, memory product maker Kingston Technology and data storage firm Seagate Technology will contribute ~$4B for convertible and non-convertible preferred stock. According to Bloomberg, Pangea, the special purpose entity making the acquisition, will receive ~$5 billion in loans.
  • Toshiba anticipates the deal will close by March 31, 2018 and give a ~$7B boost to the conglomerate after taxes. If the deal comes through before the end of March, Toshiba would avoid reporting a negative net worth for a second straight year — thus keeping its shares from being delisted on the Tokyo Stock Exchange.
  • After the news, shares of Western Digital fell as much as 5.5% Wednesday in early trading.
All Eyes on the Memory Market 
  • Arduous Road: The official search for a buyer commenced in March, when Toshiba announced that it would sell its chip business to cover the $6.3B losses incurred from its majority-owned nuclear reactor unit, Westinghouse Electric Co. (Toshiba bought Westinghouse in 2006, but cost overruns at its reactors and a downturn in demand worldwide for nuclear energy led to the company’s bankruptcy filing on March 29). Foxconn submitted the highest bid earlier in April, but fetching the highest price wasn’t Toshiba’s sole consideration; the conglomerate had to weigh other factors, such as government opposition and domestic preference, against competitive bids. In addition, resistance from Western Digital opened up negotiations with other potential bidders and contributed to the delay. The final bidder was unknown even up until Tuesday — odds were in Western Digital’s favor briefly only to change today, for the last time. 
  • Legal Woes: Toshiba’s distrust toward Western Digital, due to the ongoing legal battle between the two parties, played a big role in Toshiba’s final choice of Bain. Western Digital took Toshiba to court, arguing that as a joint venture partner in the U.S. chip business, Western Digital should have veto rights in any sale decisions. Toshiba then sued the company for more than $1B for interference. After today’s news, Western Digital declined to comment on the company’s next course of action.
  • Competitive Spirit: Apple’s support also made the Bain consortium more attractive for Toshiba, as both companies are invested in seeing Toshiba gain more market share in the flash memory market. By participating, Apple could help lessen its dependence on rival Samsung’s supply of high-end compact chips. While Toshiba pioneered NAND flash memory and is the world’s no. 2 producer of NAND memory chips by volume, Samsung has established itself as the leader in the market today.
  • Crucial Timing: Now that the Japan-U.S.-South Korea consortium has won Toshiba’s approval over other competitors, the next greatest priority for the group is to resolve the legal dispute quickly and to ensure the sale goes through. In light of these complications, the consortium came up with an attractive offer for Toshiba: Bain Capital and SK Hynix would shoulder costs to settle the lawsuit, in addition to keeping the ratio of SK Hynix’s voting rights low to avoid antitrust issues in the future. Also, the consortium proposed that Innovation Network Corporation of Japan and Development Bank of Japan would invest in Toshiba Memory once the legal dispute comes to a resolution, while Bain and the rest of the members would pay for the investment by the two Japanese parties.
For more information about this development, click here to read the Bloomberg report.
martinwolf was not the advisor in this transaction.
previous post Back to Articles next post

18 Oct 2021

CDW To Acquire Sirius Computer Solutions

Financial Information ($USD) Enterprise Value: $2.5 Billion EV/REV: 1.23x Transaction Details CDW Corporation today announced it has entered into a definitive agreement to acquire Sirius Computer Solutions, Inc from an affiliate of Clayton, Dubilier & Rice for $2.5 billion in cash. Sirius, a leading provider of secure, mission-critical technology-based solutions, generated 2020 net sales of $2.04 billion with approximately 3,900...

29 Sep 2021

H.I.G. Capital Announces Sale of Trace3

Financial Information Not Disclosed Transaction Details H.I.G. Capital announced that one of its affiliates has entered into a definitive agreement to sell Trace3, a premier provider of IT solutions and services, to affiliates of American Securities. Financial terms of the transaction are not being disclosed, but the press release cites Trace3 revenue of $1.4 billion....

02 Aug 2021

TowerBrook Capital Partners Makes Strategic Investment in EisnerAmper LLP

Transaction Details TowerBrook Capital Partners, an international investment management firm, has made a strategic investment in EisnerAmper, one of the largest professional services firms in the world, offering premier accounting, tax and business advisory services. The firm will now operate two divisions: EisnerAmper LLP, a licensed CPA firm, will provide attest services; and Eisner Advisory Group LLC,...