Published On: Thu, Jun 15th, 2017

Broadcom in lead as Toshiba considers memory unit bids

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U.S. chipmaker Broadcom Ltd. has gained the upper hand in the final stretch of negotiations to buy Toshiba Corp.’s semiconductor memory unit Toshiba Memory Corp., The Yomiuri Shimbun has learned.

This is apparently because the firm has made a liberal offer, and its acquisition of the memory unit would be expected to smoothly pass screenings by the Japan Fair Trade Commission and antimonopoly authorities in other countries that could hamper an early sale.

Toshiba intends to narrow down its potential suitors and make a decision by next week. It is scrutinizing proposals from three other bidding camps as well as Western Digital Corp. (WD), which is negotiating with Toshiba separately.

Broadcom would bring ‘stability’

Four camps — Broadcom; the so-called Japan-U.S. alliance led by the public-private fund Innovation Network Corporation of Japan; an alliance of U.S. investment fund Bain Capital and South Korean chipmaker SK Hynix Inc.; and the duo of Taiwan’s Hon Hai Precision Industry Co. and Sharp Corp. — are currently bidding for Toshiba Memory.

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WD, which jointly produces memory chips with Toshiba, objects to the sale of the unit to a third party, and is continuing to negotiate a purchase separate from the bidding.

According to several people familiar with the matter, Broadcom’s negotiation is based on a ¥2.2 trillion offer, which is more than the “at least ¥2 trillion” that Toshiba desires. As the pillar of Broadcom’s business is semiconductors for communication, its acquisition of Toshiba Memory is likely to smoothly pass antimonopoly screenings regarding the memory market.

Some officials of the banks that have connections with Toshiba evaluate Broadcom’s way of independently raising funds and making investments as an approach that would bring “stability.”

WD’s strategy

Meanwhile, Toshiba has focused on negotiations with WD. The U.S. chipmaker is considering joining the Japan-U.S. alliance that consists of the Innovation Network Corporation of Japan, the government-affiliated Development Bank of Japan Inc. and U.S. private-equity firm Kohlberg Kravis Roberts & Co., and raising the size of its investment to close to ¥2 trillion by means other than stocks.

At this point, Toshiba is concerned that WD, which has clashed with it over the sale, will eventually acquire a controlling interest. WD has also indicated that it could bring an action against other potential buyers, which Toshiba sees as “a sabotage that cannot be overlooked,” and this move has become another reason that Toshiba mistrusts WD.

While it is becoming unclear whether WD will join the Japan-U.S. alliance, the alliance is growing increasingly close to the Bain Capital-SK Hynix alliance, and considering an investment proposal within a new framework.

If realized, the potential new alliance could become a powerful candidate. On the other hand, there are views that a situation where a rival South Korean company participates should be avoided.

The Hon Hai-Sharp alliance, meanwhile, is indicating that it may join up with major companies including Apple Inc. and present a bid far exceeding ¥2 trillion. However, the Japanese government has lingering concerns over a potential technology leak.Speech

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