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For Toshiba Chip Unit, Last-Minute $18 Billion Bid Made By Bain As It Brings In Apple

For Toshiba Chip Unit, Last-Minute $18 Billion Bid Made By Bain As It Brings In Apple
By bringing in Apple Inc to help bolster its bid, a consortium led by Bain Capital has made a revised last-ditch offer for Toshiba Corp’s chip unit worth about $18 billion, reported the media quoting sources with direct knowledge of the matter.
Ahead of their self-imposed deadline of Thursday, the embattled Japanese conglomerate and Western Digital Corp are struggling to strike a deal and the new offer comes amidst such a situation, said sources.
In order to cover billions in losses at its bankrupt U.S. nuclear business Westinghouse, Toshiba has been scrambling to sell its flash memory unit - the world’s No. 2 producer of NAND chips.
Reaching a point that other bidders were favored first while the U.S. firm has also initiated legal action that threatens to derail any deal that does not have its consent, Toshiba’s relationship with Western Digital, its joint venture partner for its chip business, has been rocky throughout the auction process.
The revised offer is worth some 2 trillion yen ($18.2 billion). while Apple will provide up to 400 billion yen and Japanese banks will give around 600 billion yen in support, one of the sources said that Bain and South Korean chipmaker SK Hynix Inc will be responsible for 1.1 trillion yen.
By investing 200 billion yen, the proposal also calls for Toshiba to be part of the deal.
Toshiba’s previous preferred bidder was a Bain-led group. Toshiba was told by the Japanese government that they were reluctant to close a deal in the face of the legal risks posed by Western Digital’s demands and the talks with the preferred consortium lapsed as Japan government investors who had been part of that consortium made such a demand.
As it will invite the state-backed investors - the Innovation Network of Japan (INCJ) and the Development Bank of Japan (DBJ) - to invest in the business only after any arbitration with Western Digital is settled, Bain’s new offer is designed to get around that problem.
Including U.S. private equity firm KKR & Co LP. Banking, the Western Digital-led consortium’s bid was trumped by the 1.9 trillion yen offered.
Japanese broadcaster NHK, which said that the bid would be structured so that Bain and Toshiba would each hold 46 percent of the unit, Bain’s revised bid was first reported by this news outlet.
the size of any potential stake to be held by the U.S. firm in the chip unit is the bickering point got Toshiba and Western Digital, media had reported earlier quoting sources that are familiar with the matter. Convertible bonds are the only means that Western Digital plans to invest for now.
It is not clear if it will give serious consideration to Bain’s new proposal even though Toshiba wants to reach a deal soon.
Toshiba may not clear all necessary regulatory approvals by the end of the financial year in March if it fails to clinch a deal in the next few weeks. That would increase its chances of being delisted as it would likely lead to Toshiba reporting negative net worth for two years in a row.

Christopher J. Mitchell

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