Toshiba Corp executive board agreed to sell its memory chip unit to Bain Capital for 2 trillion yen or $18 billion. The deal could help Toshiba with its struggling financial performance, as the company faces possible delistment off the Tokyo Stock Exchange.
Bain’s motive for the purchase is the potential surge of high demand for the chips in the market and looking to sell it to big buyers.
On Tuesday, sources had said Toshiba was leaning towards selling the branch to its U.S. joint venture partner Western Digital Corp. Prior to Bain’s acquisition, Western Digital had caused legal issues against Toshiba, and Toshiba sued for more than $1 billion in interfering with the auction.
Toshiba confirms that the deal will complete regardless of the legal situation against Western Digital.
Toshiba says that the sale will boosts it finances by 740 billion yen or approximately $6.6 billion. That would pull it out of negative shareholder equity, a key step it aims to achieve by March to remain listed, according to Reuters.
Sources familiar with the matter say that Bain will be financially backed up by major companies such as SK Hynix Inc, Apple Inc., Dell Inc., Kingston Technology, and Seagate Technology, to raise its bid.
Toshiba agreed to Bain proposal on Wednesday, stating under the agreements that Bain, Toshiba, SK Hynix, and Japan’s Hoya pay about 960 billion yen or roughly $8.6 billion for common and convertible stock. While other companies such as Apple and Dell will spend about 440 billion yen or $4 billion for convertible and non-convertible preferred stock, a source said familiar with the matter.
But KKR and Innovation Network Corp. of Japan worked on a revised proposal. Under the revised proposal, Toshiba could buy back equity from INCJ and Development Bank of Japan later, sources said.
Then Bain, revised its offer as well. The firm reached out to Apple for financial support and asked for approximately $7 billion. Yet, it is still not clear how much Apple will contribute to the agreement.
Now, as the deal is approaching a close, Toshiba will have to deal with the legal issues with Western Digital. Sources say that Toshiba was reluctant to be able to close the deal while the issue was ongoing with Western Digital.