Western Digital, Toshiba End Feud -- WSJ

By FeaturesDow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 13, 2017).

TOKYO -- Toshiba Corp. and Western Digital Corp. agreed to settle a dispute over Toshiba's planned sale of its memory-chip unit, people involved the discussions said, clearing a major hurdle to the nearly $18 billion deal.

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Directors at both companies separately voted to drop legal cases that they brought against each other, the people said. Lawyers are preparing documents and a formal announcement is expected as soon as this week, they said.

In September, Toshiba agreed to sell its NAND flash-memory manufacturing unit to a group led by U.S. private-equity firm Bain Capital LLC for about $18 billion. Apple Inc. and other U.S. companies provided funding for the deal.

The Japanese industrial conglomerate was eager to raise money after a March bankruptcy filing by its U.S. nuclear affiliate, Westinghouse Electric Co., left it with liabilities in excess of assets.

Western Digital acquired SanDisk, Toshiba's longtime flash memory business partner, in 2016. It said it had a right of refusal over any sale of the Toshiba unit and filed arbitration claims earlier this year challenging the sale plans.

Under the proposed settlement, Toshiba would keep its joint-venture ties with Western Digital, the people involved in the discussions said. The two companies would continue jointly investing in the chip unit to expand manufacturing capacity and Western Digital would continue to have rights to sell part of the unit's output.

Toshiba raised Yen600 billion ($5.3 billion) this month by issuing new shares. Closing the chip deal would put Toshiba's balance sheet more firmly in the black.

If the Western Digital dispute is resolved, the main remaining hurdle to Toshiba's deal with Bain is antitrust reviews, particularly by authorities in China.

NAND flash memory chips, used in smartphones, computer servers and other electronic devices to store data, are in high demand. Toshiba is a distant second to Samsung Electronics Co. in terms of revenue from these products, according to research firm IHS Markit, and analysts say Toshiba must complete the sale as soon as possible to keep the South Korean maker from further cementing its dominance.

While Toshiba was struggling to determine the future of its chip unit for much of this year, Samsung made several big investment plans to secure its leading position.

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com

(END) Dow Jones Newswires

December 13, 2017 02:47 ET (07:47 GMT)