Western Digital stands by Toshiba memory business sale delay play

Western Digital stands by Toshiba memory business sale delay play

​Western Digital plans to plough ahead with its efforts to delay the sale of Toshiba’s memory chip business

Western Digital plans to plough ahead with its efforts to delay the sale of Toshiba’s stake in the memory chip business in which it is partners with the Japanese tech company.

Toshiba moved to put its flash memory business stake up for sale earlier this year in a bid to cover losses incurred by the Westinghouse Electric Company, which it acquired in 2015.

The embattled Japanese tech company revealed in December last year that the goodwill impact from its acquisition of the US-based nuclear power plant construction and services company could “reach a level of several 100 billion yen or several billion US dollars”.

Google, Amazon, Apple, Foxconn Technology Group and Kingston Technology are rumoured to be among the potential bidders for stock in the business, along with Western Digital, according to reports.

The US-headquartered storage technology company acquired SanDisk, which has been a long-term partner of Toshiba, last year. However, it is understood that Western Digital has not been included in the auction of the memory chip business.

In May, Western Digital sought arbitration over the proposed sale, demanding that its consent had to be taken before Toshiba can go ahead with plans to sell a stake in its memory business to raise its sought-after funds.

“Toshiba’s attempt to spin out its joint venture interests into an affiliate and then sell that affiliate is explicitly prohibited without SanDisk’s consent,” said Western Digital CEO, Steve Milligan, in a statement at the time, citing joint venture agreements between SanDisk and Toshiba.

On 2 June, Toshiba told investors it would “revert to itself” from Toshiba Memory Corporation (TMC) – which was split from Toshiba Corporation on 1 April – the stake of its joint venture between itself and SandDisk at its flash memory manufacturing plant in Yokkaichi Operations.

“This move, which will be effected on [3 June], has been initiated solely with the aim of securing and advancing the process for closing bids for third-party participation in TMC in a timely manner,” Toshiba said.

“Multiple parties have expressed an interest in investing in the memory business, and Toshiba has advanced the process in the conviction that doing so does not, in any way, breach any of its agreements in the memory business with SanDisk.

“However, Western Digital…has objected to, and subsequently interfered with, the progress of the bid process. WD has also not participated in the bid processes which have been conducted from January this year,” it said.

Further, Toshiba claimed that, in addition to invoking arbitration proceedings, Western Digital had started to contact other third party bidders and Toshiba’s supporting banks with warnings of legal action.

“These actions have brought Toshiba to a point where its management is no longer able or willing to ignore the unwarranted interference,” Toshiba stated.

Western Digital, meanwhile, responded to Toshiba’s announcement, stating that the Japanese company’s move to “revert to itself” the flash memory joint venture interests in its operation with Western Digital from TMC would fly in the face of contracts between the two companies.

“Toshiba’s representation…confirms Western Digital’s position that any attempt by Toshiba to transfer those interests would breach SanDisk’s contractual consent rights,” it said in a statement, also published on 2 June.

“Toshiba’s new action does not resolve SanDisk’s claims in the pending arbitration; in fact, Toshiba has simply replaced one attempt to circumvent SanDisk’s consent rights with another. The arbitration will therefore continue.

“Western Digital continues to believe that any actions by Toshiba to transfer its [joint venture] interests to a third party without SanDisk’s consent clearly violate the anti-transfer provisions of the joint venture agreement,” it said.

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