A consortium seeking to buy Toshiba Corp.’s prized memory chip unit may delay closing the deal in order to wait for a court decision on whether the sale should be blocked, sources said Tuesday.
Western Digital Corp., Toshiba’s chip production partner, opposes the sale and is seeking a preliminary injunction against it in a California court. A hearing is scheduled to take place July 15 Japan time, where a decision could be handed down.
Cash-strapped Toshiba is rushing to sell the unit, Toshiba Memory Corp., to raise funds to eliminate its negative net worth and avoid being delisted from the Tokyo stock market.
Toshiba has chosen as its preferred bidder a consortium consisting of the Innovation Network Corp. of Japan and the Development Bank of Japan — both backed by the government — as well as U.S. fund Bain Capital and South Korean chipmaker SK Hynix Inc.
The consortium had been willing to sign a deal as soon as it was drawn up, with a clause saying the sale would be renegotiated if Western Digital’s injunction were granted. But with the hearing drawing close, involved parties now want to await the result, the sources said.
Western Digital argues in its court filing that any sale of the unit without its consent violates the terms of a joint venture contract withToshiba.
Toshiba filed a counterargument saying the court has no jurisdiction over the matter because the Japanese firm has no major operations in California.
It also claimed Western Digital’s filing “is motivated solely by (its) desire to drive away Japanese bankers who are providing a financial lifeline to Toshiba and bidders interested in purchasing Toshiba Memory Corp.”
Meanwhile, the consortium itself could face a reshuffle as the manner of SK Hynix’s participation has emerged as a further sticking point.
The previous plan was to have SK Hynix provide loans to Bain but not make a direct investment in the chip unit to avoid antitrust issues and concerns of a tech drain to foreign companies. Toshiba President Satoshi Tsunakawa told a press conference last month the Incheon-based company will “have no voting rights.”
Sources familiar with the matter, however, say SK Hynix has demanded bonds that can later be converted to shares with voting rights. Parties within the consortium are considering a compromise with SK Hynix being allocated less than 20 percent of votes.