Racers in Acquisition of Toshiba Semiconductor Trying to Win Over Apple to Their Sides

As three players in competition to take over Toshiba Memory are trying to win over Apple to their sides, much attention is being paid to Apple’s choice. Apple buys 30% of semiconductors produced by Toshiba Memory, Korea-US-Japan Alliance including Korea's SK Hynix, Taiwan’s Foxconn, and America’s Western Digital (WD) are courting Apple.

According to the Mainichi Shimbun Newspaper in Japan on August 8, the WD camp, the favorite, proposed having Apple pay 150 billion yen instead of WD in taking over WD.

This proposal is aimed at passing examinations by anti-trust laws of countries by making WD doing the same semiconductor business as Toshiba Memory stand behind Apple in terms of funding as well as growing the semiconductor business stably by bringing in one of the biggest customers of Toshiba Memory.

Toshiba and the WD camp have agreed on the form of taking over the majority of the voting rights of Japanese power, mainly Industrial Innovation Organization and Japan Policy Investment Bank, with the amount of 1.9 trillion to 2 trillion yen (about 20.8 trillion won).

However, WD is having troubles discussing details such as WD's future voting right ratio and WD's method of providing funds to pass the examinations of antitrust laws. An amendment demands Apple provide 50 billion yen to make up for a cutback for WD.

In addition, the Nihon Keizai Shimbun Newspaper reported that a plan was seriously considered that WD will receive financial support from US-based Kingston Technology Corp. Toshiba is also seeking to meet the total amount for the acquisition of the semiconductor business by making some equity investment.

However, it is said that it is unclear whether or not Apple will accept the proposal as it is quite unusual for Apple to give funds to a mobile phone parts supplier. In the revised proposal, the name of WD is not included in the camp at the time of acquisition.

However, they are considering a plan to obtain pre-emptive rights and participate in the management of Toshiba Memory after Toshiba Memory is listed as three years pass after the takeover of Toshiba Memory. This can play a part as a variable.

Inside Toshiba, a mood is evident that Toshiba employees will weaken WD’s involvement in the future as Toshiba collided with WD over a lawsuit to international tribunals in the sell-off of Toshiba Memory.

If WD does not give up acquiring voting rights in the end, negotiations will fail at the eleventh hour. The primary negotiation with the Korea-US-Japan alliance deadlocked as SK Hynix wanted voting rights, Japanese media reported.

It is also a variable for WD to demand the revision of its ownership ratio of production facilities at Yokkaichi Plant in Mie Prefecture which WD will jointly invest in instead of postponing funding at the time of the acquisition. The two companies are dividing semiconductor products according to the percentages of their production facilities.

WD wants to revise the current distribution ratios of the second half of the 50% level for Toshiba and the first half of the 40% level for WD but Toshiba and Japanese government authorities have complicated ideas about that.

The Korea-US-Japan alliance led by US Bain Capital and Taiwan's Foxconn are also moving to win over Apple to their sides until the last minute. All of the three camps are hoping to finally win the acquisition race with Apple as leverage. 

Toshiba will hold a meeting of the board of directors to determine and announce the final winner on September 13, a few days from now.