A Toshiba Sale Hits Resistance -- WSJ

By Ted Greenwald Features Dow Jones Newswires

Western Digital Corp. on Sunday ratcheted up the pressure in its dispute with Toshiba Corp., filing a request for binding arbitration to prevent the troubled Japanese company from selling its stake in operations jointly owned by the two companies.

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In its arbitration request, Western Digital claims Toshiba breached its contract by transferring its interest in the flash-memory joint ventures to an affiliated company without Western Digital's consent.

The request is the latest spat between Western Digital and Toshiba, which is trying to sell its profitable memory-chip business in an effort to bolster its ailing finances. Western Digital, which jointly owns a flash-memory semiconductor plant in Japan with Toshiba, has said the Japanese company promised not to sell its stake without Western Digital's approval.

Toshiba has accused Western Digital of interfering with the chip-business sale and threatened to sue the California company unless it drops the breach-of-contract assertion.

A Toshiba spokesman on Monday declined to comment specifically on Western Digital's arbitration request but reiterated his company's view that the planned sale doesn't violate any agreement between the two firms and that Western Digital has no right to stop it.

Western Digital said Sunday that the contracts forming the joint ventures, which involve NAND flash-memory chips used in data storage, include provisions that require one party's consent before the other party can sell its stake. Western Digital also said the agreements allow one party to seek arbitration and an injunction if it believes the other party has breached the terms.

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A panel in San Francisco will hear the arbitration under the rules of the International Chamber of Commerce, as required by the joint-venture agreements, Western Digital said. The arbitration would kick off a legal process that could take more than a year.

Toshiba in its most recent earnings report warned that its future was uncertain after losses at its U.S. nuclear unit, Westinghouse Electric Co., which filed for bankruptcy in March. Toshiba has said the sale of the chip business is crucial to its survival.

On Monday, Toshiba said it expected to book a net loss of Yen950 billion ($8.4 billion) for the fiscal year ended March 31 due to losses stemming from the Westinghouse filing. For the current fiscal year, Toshiba said it expected to book a net profit of Yen50 billion.

Several companies are bidding for the Toshiba semiconductor unit, including Western Digital as well as Foxconn Technology Group of Taiwan, SK Hynix Inc. of South Korea, and U.S.-based Broadcom Ltd. The joint ventures at issue originally were formed between Toshiba and SanDisk Corp., a supplier of memory for smartphones. Western Digital acquired SanDisk in 2016.

--Takashi Mochizuki in Tokyo contributed to this article.

Write to Ted Greenwald at Ted.Greenwald@wsj.com

(END) Dow Jones Newswires

May 15, 2017 02:48 ET (06:48 GMT)