Takeover of Toshiba’s Semiconductor Division
SK Hynix is expected to invest about 300 billion yen (US$3.0 billion) in a bid to acquire Toshiba Semiconductor. It is forecast that SK Hynix will be able to avoid a running foul of antitrust laws by using a form to invest in a special purpose corporation (SPC) funded by a Korea-US-Japan alliance. As a US-Japan consortium led mainly by Japanese government-led funds was expanded into a Korea-US-Japan alliance after SK Hynix’s participation, the multinational consortium is more likely to beat Broadcom of the US, the strongest candidate in the previous time and finally win the Toshiba Semiconductor acquisition race.
According to the Asahi Shimbun newspaper in Japan and the semiconductor industry on June 14, the Ministry of Economy, Trade and Industry of Japan, which controls the sale of Toshiba’s memory division, changed the US-Japan alliance drastically into the Korea-US-Japan consortium and expanded the volume of the investment to 2 trillion yen. The three countries' coalition will include a Japanese government-based fund industry innovation organization, multiple Japanese companies, US private equity funds such as Bain Capital, and SK Hynix among others. They will found an SPC to take over Toshiba’s memory division.
The outline of the investment scale is also taking shape. According to the Asahi Shimbun newspaper, SK Hynix, the Innovation Network Corporation of Japan and the Development Bank of Japan, and US private-equity venture capital Bain Capital will fork out 300 billion yen each. Toshiba will invest up to 100 billion yen (US$1.0 billion), and multiple Japanese companies 140 billion yen (US$1.4 billion). US investment fund Kohlberg Kravis Roberts (KKR) is also considering investing 200 billion yen (US$2.0 billion). In addition, Mitsubishi Tokyo UFJ Bank is planning to finance 400 billion yen (US$4.0 billion) to the SPC.
The Asahi Shimbun newspaper forecast that the three-nation coalition’s funds will hover around 2.1 trillion yen (US$210 billion). This amount is close to 2.20 trillion yen (US$220 billion) that Broadcom proposed before. It is highly likely that the multinational alliance will occupy a more advantageous position in the takeover as the consortium includes Japanese policy funds and corporations. The US-Japan alliance led by the Japanese government had trouble raising funds in the first place. But Bain’s and SK Hynix’s participation ballooned the funds. However, it is said that the partnership did not accept Western Digital (WD) which applied for an injunction against the sale at the International Court of Arbitration, claiming that this sale is a violation of its contract with Toshiba as WD is collaborating with Toshiba in production of semiconductors.
The consortium's formation will change, and the appointment of the preferred bidder, which was originally scheduled for 15 days, is expected to be delayed. As the new Korea-US-Japan alliance becomes more concrete, it will be necessary for the Japanese side to investigate details of each camp, which will delay the decision of the first negotiator. Toshiba plans to finalize the selection of a negotiator at the general meeting of shareholders to be held by the end of this month.
SK Hynix, a memory semiconductor company like Toshiba, will be able to elude antitrust laws by participating in the Toshiba takeover in the form of making investment in the SPC. If the SPC including SK Hynix succeeds in acquiring Toshiba, SK Hynix will be able to generate various synergies in the NAND flash business with Toshiba. The combined market share of the two semiconductor manufacturers is close to Samsung Electronics' market share which is the highest in the world.