In a last-ditch effort to clinch a deal both companies consider vital, Western Digital Corp plans to raise its offer for Toshiba Corp’s prized semiconductor unit to $18 billion or more, reported the media quoting sources familiar with the matter.
A consortium led by a Japanese government-backed fund include the U.S. chipmaker. The last day for choosing a preferred bidder for Toshiba Memory Corp unit, the world’s second-largest producer of NAND memory chips, is Thursday and the group will present the new offer of 2 trillion yen or more by that period to the struggling Japanese conglomerate, suggested media reports.
Source also reportedly said that U.S. chipmaker Broadcom Ltd which has partnered with U.S. private equity firm Silver Lake to offer 2.2 trillion yen, is being favored by Toshiba.
While Toshiba could not immediately be reached for comment, a spokesman for Western Digital had no comment. As it rushes to find a buyer to cover billions of dollars in cost overruns at its now-bankrupt U.S. nuclear business Westinghouse Electric Corp, Toshiba had set a 2 trillion yen threshold for the sale.
As uncertainty about the make-up of the groups bidding for Toshiba’s crown jewel has increased, the offer comes by Western Digital, a long-time partner of the laptops-to-nuclear conglomerate’s lucrative chips division.
As it jointly operates a key flash-memory chip plant with Toshiba in western Japan, Western Digital has been seen by some sources as crucial to successful deal.
But the auction has seen the tow companies being at logger heads. An international arbitration claim that Toshiba has breached joint-venture contracts by entertaining outside bids, is being pursued by Western Digital.
The U.S. firm will drop its claim if Toshiba agrees to the new offer, sources said even as Western Digital argues that the sale cannot proceed without its consent.
Since the U.S. firm is the world’s third-largest NAND producer behind South Korea’s Samsung Electronics Co and Toshiba, Toshiba is concerned an acquisition by Western Digital would run into antitrust objections from China and elsewhere.
Whereas the U.S. firm had previously been looking for an equity stake in Toshiba Memory, the source said that to counter those concerns, the Western Digital portion of the consortium’s new offer will be in the form of a debt purchase.
Sources have been quoted earlier saying that 1.6 trillion yen was initially offered by the Japan-Western Digital consortium. But in a meeting with Toshiba CEO Satoshi Tsunakawa, CEO Steve Milligan then raised the offer to close to 2 trillion yen on Friday.
But Friday’s bid was not satisfactory for Toshiba. “Our concerns about the prospects of success for a deal were not wiped out,” a Toshiba spokeswoman said.
The caused the bid for the 2 trillion yen, or more latest offer.
Toshiba’s Tsunakawa asked if Western Digital “could further increase the price”, in Friday’s meeting, reported the media quoting sources. Tsunakawa added that the U.S. firm would modify its proposal, “to align with their thinking”.
Including building two fabrication plants, a commitment to $25 billion dollars in capital spending for the joint venture’s Yokkaichi facility, would be included in Western Digital’s new offer.
(Adapted from CNBC)