Bain Capital plans to acquire Toshiba chip division for US$19 billion
According to foreign media reports, a person familiar with the matter said that the camp led by Bain Capital and Japanese investors proposed to acquire Toshiba chip division with about 2.1 trillion yen (about 19 billion US dollars). One of the leading bidders in this highly competitive auction.
The US private equity firm was supported by Japan's InnovaTIon Network Corp. of Japan (Japan Innovation Network, INCJ) and the Japan Development Bank. According to people familiar with the matter, this is a necessary condition for approval by the Japanese government. Bain Capital also negotiated with US private equity giant KKR&Co., which led another bidding camp, to ask the latter to join its camp. Toshiba’s share price rose 2.4% in Tokyo today.
Another leading bidder is US chip maker Broadcom Ltd. The company raised a bid price of approximately 2.2 trillion yen. The Toshiba board of directors met on Thursday to discuss the situation of these bidders, hoping to pick out the winning bidders at the end of June.
Toshiba and Bain Capital have not commented on this.
Due to opposition from Western Digital, the auction began to become complicated. The US company shares certain chip assets with Toshiba, so it seeks to prevent the chip business from falling into the hands of competitors. It is particularly against the bidding of Broadcom. Toshiba needs to sell its chip division as soon as possible to raise cash to fill losses in its nuclear power sector.
According to the bidding agreement of Bain Capital's camp, INCJ will take out 300 billion yen of common stock, and the Japan Development Bank will take out 300 billion yen of preferred stock and common stock. Korean chip maker SK Hynix will only provide loans to avoid antitrust investigations; it will take out half of the bid price.
Taiwan company Hon Hai Seiko also submitted a bid for the Toshiba chip division. However, Toshiba is not willing to sell its chip division to Hon Hai Seiko because it is worried about the inflow of related technology into China. Guo Taiming, founder of Hon Hai Seiko, complained that the bidding process was unfair and reminded bidders to follow relevant bidding regulations.
For potential buyers, they need to invest a lot of money to upgrade their chip factories and production lines after acquiring the Toshiba chip division in order to remain competitive. In the chip industry, billions of dollars are invested every year.
Western Digital initially hoped to gain control of the Toshiba chip division, but its bid price was simply not comparable to its competitors. Therefore, it turned to legal channels to influence the bidding process. According to people familiar with the matter, the Japanese government initially supported the bidding for Western data, but the actions of the American company gradually alienated the Japanese government.
This week, Western Digital applied to the court for an injunction to prevent Toshiba from selling its chip division. “Toshiba does not have the right to transfer the assets they jointly own to a third party. It cannot enter into any transaction with a third party without our consent,†Western Digital said in a statement.
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