Japanese Media Reports SK Hynix Consortium Highly Likely to Acquire Toshiba’s Chip Unit

Japanese media has reported back to back that a consortium consisting of companies from three countries – South Korea, Japan and the U.S. – including SK Hynix, is highly likely to be selected as a preferred bidder of Toshiba’s chip unit at the company’s board meeting to be held on June 21. However, Western Digital (WD), which has co-produced at the Toshiba’s production base in Yokkaichi, can be a decisive factor as the U.S.-based company claims exclusive negotiating rights and is opposed the sale of the memory unit.

According to Japan’s Asahi Shimbun on June 20, Toshiba is planning to hold its board meeting as early as on June 21 to choose a preferred bidder for its chip business subsidiary and sign a sale contract before its shareholders' general meeting scheduled to take place on June 28. The local media says a consortium formed by SK Hynix, Japanese government-backed fund, Innovation Network Corporation of Japan (INCJ), and U.S. private equity firm is expected to be chosen as the preferred bidder, beating U.S.-based Broadcom.

The three-country consortium is more likely to receive approval from the Japanese government as it is led by Japan’s Ministry of Economy, Trade and Industry. Moreover, Toshiba is favorable to the consortium because it will offer 2 trillion yen (US$17.94 billion or 20.45 trillion won) for the acquisition which meets the minimum price Toshiba wants. On the other hand, Broadcom, which offered 2.2 trillion yen (US$19.74 billion or 22.5 trillion won), suffers from concerns about employment retention as the company laid off employees after it took over a company in the past.

However, there is a variable. WD has sought an injunction to prevent its partner from selling the chip business without the U.S. firm's consent through the International Court of Arbitration. Japanese media said that Toshiba carries on negotiations with WD but hasn’t reached an agreement yet, citing remarks from Toshiba and three-country consortium officials. Asahi Shimbun said that it is still unclear whether Toshiba will select a preferred bidder on the 21st.