Toshiba Increases Business Risks by Missing Target Date for Chip Unit Sale

Toshiba's Yokkaichi fabrication plant

Toshiba's Yokkaichi fabrication plant

Pedestrians walking past a logo of Toshiba Corp. outside an electronics retailer in Tokyo.

Japan's Toshiba Corp said on Wednesday it has agreed to sell its prized semiconductor business to a group led by US private equity firm Bain Capital LP, a key step in keeping the struggling Japanese conglomerate listed on the Tokyo exchange.

Instead, South Korea's SK Hynix Inc, part of the winning consortium, said talks were still ongoing. Sources acquainted with the issue affirmed consortium individuals were all the while wrangling over points of interest of their understanding and said commitment letters from all members were as yet required before the deal could be signed formally.

The new arbitration requests, filed in the International Court of Arbitration that oversees the companies' agreement, seeks to stop Toshiba from investing in the so-called Fab 6 facility in Yokkaichi, Mie Prefecture of Japan, unless Western Digital's subsidiary Sandisk was also allowed to invest.

Toshiba representatives did not immediately return a request for comment.

Shares in Toshiba reflected the concerns, falling more than two per cent in late afternoon trade. Attempting to plug a falling balance sheet gap after a cost victory at its now-bankrupt USA atomic business, Toshiba has been endeavoring to offer its chip business since late January.

Toshiba and Bain did not quickly answer to a demand for input.

As late as Tuesday night, sources said Toshiba was leaning towards selling the business to Western Digital. Be that as it may, there are significant questions, including the result of antitrust examinations and the fight with Western Digital. Industry experts additionally said SK Hynix's support could drag out antitrust surveys, especially in China, as Beijing is attempting to develop local players.

"It's clear to everyone that this Bain deal will have difficulty succeeding", said Akira Minamikawa, who is a principal analyst at IHS Markit.

Concurring the offer of the world's second-biggest maker of NAND flash memory chips conveys the group closer to the end process.

"To survive, Toshiba needs to shift its focus to [flash memory-backed] storage systems for servers rather than selling memory chips alone".

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