[Digital Times, Park Seul-gee] It is reported that Japanese Toshiba has actually agreed to sell its memory semiconductor business to a US-Japan Alliance consortium that includes Western Digital (WD). It is now expected that the Korea-US joint consortium including SK Hynix, which was originally the target of negotiations, will be repelled by the loss of qualification. Even though Toshiba and the US consortium have signed a sale agreement, they will have to go through the NAND flash memory anti-trust review process around the world, including Korea and China. Toshiba and Western Digital are the second and third largest players in the global NAND flash market, respectively, and dominate their respective markets.

According to the Asahi newspaper on August 27, Toshiba and Western Digital have agreed to sign a sale agreement on condition that the shareholding of Western Digital in the Toshiba memory semiconductor business is reduced to less than a third. The US-Japan Alliance consortium, including Western Digital, has participated in the INCJ, Japan Policy Investment Bank, and US investment fund Kohlberg Kravis Roberts (KKR). Western Digital is expected to buy corporate bonds (convertible bonds) worth 150 billion yen (about KRW 1.5 trillion), which can be converted into common stock, by about 2 trillion yen (about KRW 20.5 trillion), according to the consortium. Western Digital will own about 16% of Toshiba`s memory semiconductor business in voting rights if the convertible bonds are converted into stocks.

Western Digital is seeking to acquire a low percentage of its stake after investing in voting rights, such as convertible bonds, because it is likely to pass the antitrust scrutiny of each country by lowering market influence. Toshiba and Western Digital accounted for the second and third place in the global NAND flash market, accounting for 17.5% of the second quarter. Samsung Electronics ranked first with 35.6%.

However, it is industry-wide that Western Digital is not likely to pass antitrust scrutiny across countries. It is difficult to complete the examination by the end of March 2018, when Toshiba should overcome its debt overdue, because it takes more than one year to conduct antitrust review by country. Western Digital`s acquisition of Toshiba memory is still unclear.

It is anticipated that the existing US-Japan consortium will be a strong rebound as Toshiba suddenly turns the sale to Western Digital. Of course, Toshiba`s preferred bidder is not legally binding, so it`s hard to have a problem, but Toshiba`s inability to advance the final contract for more than two months, and the fact that it has not changed the contract at the last minute is an inexplicable point.

Meanwhile, it is also pointed out that Toshiba`s sale of Western Digital is similar to that of the US - Japan consortium. Earlier, the US-Japan consortium, like Western Digital, invested in Toshiba`s semiconductor business as a convertible bond, suggesting ways to become shareholders in the future.

The Japanese government, on the other hand, which has been directly involved in the sale of Toshiba semiconductor business, has been questioning securing stake in SK Hynix. But in the end, Western Digital agrees to block the transfer of semiconductor technology to Korea if the contract is signed on the same terms. Hong Hai Group, which has Foxconn as a subsidiary, offered an extraordinary amount of 3 trillion yen (about KRW 30.8 trillion) to Toshiba`s semiconductor business. However, the reason why it was turned off is that the Japanese government, which controls Taiwan`s semiconductor industry, "We have not heard from Toshiba about the sale," a SK Hynix representative said. "Negotiations are still in progress."


By Park Seul Gee seul@


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