Toshiba Will Sell Flash Memory Unit to Bain Capital, SK Hynix

Toshiba Will Sell Flash Memory Unit to Bain Capital, SK Hynix

The consortium, led by Bain, was outlined as the preferential bidder earlier this year, but delays from lawsuits, government and corporate decisions had led to the delay of the sale. Toshiba's board chose Bain over a group led by KKR & Co. and two state-backed funds, Innovation Network Corp. of Japan and Development Bank of Japan. All because of the legal action launched by Toshiba's scorned JV partner in the chipmaking business, USA group Western Digital.

Toshiba has been shopping for someone to buy its memory chip business to raise cash and keep the rest of the company afloat. On top of that, the semiconductor business requires huge amounts of investment, and Toshiba's chip unit runs the danger of losing its competitive ability as rivals roll out big capital spending plans.

Toshiba intends to see the deal through in spite of expected legal objections from partner Western Digital Corp (NASDAQ: WDC), which claims veto power. In that case, three joint ventures between Toshiba and Western Digital would not be transferred to Bain at closing and the purchase price would be adjusted, the person said. In fact, Toshiba board members were not even present during the proposal.

The race for acquiring the Toshiba unit intensified recently as the Bain-SK Hynix alliance raised its offer to 2.4 trillion yen, higher than the initial offer of 1.94 trillion yen, after WD raised its own offer from the initial 1.9 trillion yen. The special goal entity making the acquisition will be called Pangea and receive about 600 billion yen in loans, the person said.

After long weeks of negotiations, Japanese chip-maker Toshiba has agreed to sell its Toshiba Memory Corporation storage company for 2 trillion yen, or about $18 billion, down from the original 2.4 trillion offer.

The auction has gone through dizzying twists and turns.