Toshiba signs $18 billion deal with Bain-Apple consortium

Toshiba signs $18 billion deal with Bain-Apple consortium

Beyond Bain, the bid is backed by Japanese medical devices firm Hoya, chip firm SK Hynix and USA firms Apple, Kingston, Seagate and Dell.

"Today we signed a deal to sell" all the shares of its prized memory chip business to the consortium with a price tag of two trillion yen ($18 trillion), Toshiba said.

SK Hynix issued a statement saying it would invest ¥395bn (4 trillion won, $3.6bn) in the consortium's estimated ¥2 trillion ($18bn) of total investment.

The consortium consists of SK Hynix, and companies from Japan and the U.S. Western Digital said this week that it would ask a court for a legal injection against the deal.

The Japanese tech giant earlier made a decision to start negotiations on selling its memory business to the consortium including participants from Korea, the United States and Japan.

Only a handful of companies make the highest-end technology and the dominant player is Samsung Electronics, a fierce rival to Apple that controls about 40 percent of the global market for flash memory.

Now Toshiba has signed off an agreement that will see Pangea, a consortium led by Bain, take the business on but leave it to be run as a Toshiba subsidiary. Apple's equity stake is expected to be bigger than US$3bn, the value of Beats when Apple bought it in 2014.

Under the deal, the US companies will not hold any voting rights in Toshiba Memory, with Bain and Toshiba Memory management set to conduct daily operations. Because of that, the American company contends that Toshiba can not sell the chip unit without its approval. The U.S. company's lawsuits and attempts to influence the sale have caused a rift with Toshiba and provoked its Japanese partner into trying to lock it out of new, more efficient manufacturing that's being planned.

Under the agreement, Japan's Toshiba and Hoya will hold a majority of Pangea's stock. Western Digital offered to financially step away from the group that it had assembled to fund the deal, which included the American investment firm Kohlberg Kravis Roberts and the Innovation Network Corporation of Japan. None of the American investors will have voting rights.

In a move to address anti-trust concerns that may come up in a regulatory review, Toshiba said SK Hynix would be firewalled from accessing proprietary information that belonged to the chip unit and for 10 years, would not be permitted to own more than 15 percent of voting rights. If it can gain a legally bullet-proof injunction from the arbitration court then that could force Toshiba to abandon the Bain deal and, at last, negotiate exclusively with WDC.

The Bain agreement calls for the sale to go ahead even though the litigation is unresolved. Toshiba expects the deal to close by March 31 and aims to restore a positive net worth by the end of the fiscal year.

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