Near to Closing
A US-Japan-Korea consortium including SK Hynix has been selected as the preferred bidder for Toshiba’s memory chip business. The consortium have reportedly offered 20 trillion won (US$17.48 billion).
Toshiba's board of directors decided on June 21 to pick the consortium led by the Japanese government fund Innovation Network of Japan (INCJ), the state-run Development Bank of Japan and the US private equity firm Bain Capital, according to Toshiba.
"The consortium has presented the best proposal, not only in terms of the valuation but also in the certainty of deal closing, the retention of employees and the maintenance of sensitive technologies within Japan," Toshiba said in a press statement.
The statement, however, did not mention SK hynix as the Korean chipmaker joined the consortium by providing just loans worth 3 trillion won (US$2.62 billion) equivalent to around 15 percent of the acquisition price.
"We have joined the consortium as a lender due to possible antitrust disputes," an SK hynix spokesman said. He, declining to comment on the details, added, "The consortium is still in internal talks to map out the details after the deal is closed"
Market insiders, however, viewed that SK Hynix’s low profile was a realistic choice as the Korea’s second largest chipmaker did not have that much money among others, and an aggressive approach could have caused a hostile reaction from the Japanese public. They also said SK hynix’s joining the bid in the way of providing loans was for avoiding antitrust hurdles.
Samsung Electronics did not join the acquisition race because of antitrust concerns. Industry watchers said Toshiba's sales of its chip business will not affect Samsung's dominant position.
Samsung Electronics took up 36.7 percent of the global NAND flash market in the first quarter of this year, followed by Toshiba with 17.2 percent, Western Digital with 15.5 and SK hynix with 11.4, according to market researcher IHS Markit, It means that the deal, when completed, is expected to raise SK hynix to be the world's second-largest NAND flash chipmaker, but the combined share of the two companies will stand at 28.6 percent, still falling behind Samsung.
The market researcher forecast the global NAND flash market will rise 6.1 percent on average annually by 2020 based on the rising demand but short supply, due to expanded use of mobile devices including smartphones.
In the meantime, industry watchers said the variable of Western Digital may still be a hurdle to the sales procedure as the US-based chip maker filed a request for arbitration with an international court earlier, demanding exclusive negotiation rights.
Under the circumstance, Toshiba tries to reach a definitive agreement with the consortium by June 28, the date scheduled for its annual ordinary general shareholders meeting, and to close the deal by March 2018. Before the date, Toshiba has to clear required processes including competition law approvals in key jurisdictions.