Bain, INCJ said to offer $19 billion for Toshiba Chip Unit

A group led by Bain Capital LP and Japanese investors has offered about 2.1 trillion yen ($19 billion) for Toshiba Corp.’s semiconductor division, emerging as a leading bidder in the hotly contested auction, the other leading contender is Broadcom.

By: Bloomberg | Tokyo | Updated: June 16, 2017 2:03 pm
Bain Capital LLP,Toshiba Corp, semiconductor division, US private equity firm, Broadcom Ltd, Western Digital Corp The auction has been complicated by objections from Western Digital Corp., which jointly owns certain chip assets with Toshiba. (Source: Bloomberg)

A group led by Bain Capital LP and Japanese investors has offered about 2.1 trillion yen ($19 billion) for Toshiba Corp.’s semiconductor division, emerging as a leading bidder in the hotly contested auction, according to people familiar with the matter.

The US private equity firm has the backing of state-supported Innovation Network Corp. of Japan and Development Bank of Japan, seen as essential in winning government approval for an acquisition, said the people, who asked not to be identified because the matter is private. Bain is also in talks with KKR & Co., which led a rival bid, to join the consortium, one of the people said. Shares of Toshiba jumped as much as 2.4 percent in Tokyo on Friday.

The other leading contender now is US chipmaker Broadcom Ltd., which made an offer of about 2.2 trillion yen. Toshiba’s board met Thursday to discuss the bids and aims to pick a winner by the end of June. Kaori Hiraki, a spokeswoman for Toshiba, declined to comment. Bain didn’t immediately respond to a request for comment.

The auction has been complicated by objections from Western Digital Corp., which jointly owns certain chip assets with Toshiba. The US company has sought to prevent the business falling into the hands of rivals and opposed Broadcom in particular. Tokyo-based Toshiba is under pressure to sell the chips unit soon and raise cash needed to pay for losses in its nuclear power business.

Under the Bain bid, INCJ will contribute 300 billion yen in equity, while DBJ will contribute another 300 billion yen in preferred shares and equity, the person said. South Korean chipmaker SK Hynix Inc. will provide only loans to avoid antitrust hurdles and contribute about half of the bidding money, another person familiar with the matter said.

Also Read: Toshiba said to place temporary hold on memory chip business

Taiwan’s Hon Hai Precision Industry Co. has also submitted a bid for the chips unit, but Toshiba is reluctant to sell to the company because of its close ties to China. Founder Terry Gou has complained about the unfair process and vowed to press his case.

For potential chipmaker buyers, control of Toshiba’s output of memory chips is crucial in making any investment worthwhile. And investment firms need to guarantee they have enough capital available to continue to upgrade Toshiba’s plants and production in an industry where billions of dollars a year are needed to stay competitive.

Also Read: Western Digital to raise Toshiba chip offer to $18 bln or more

Western Digital, which initially sought a controlling stake, hasn’t been able to match the offers of rival bidders and instead resorted to legal action to influence the process. Its aggressive legal maneuvering has increasingly alienated the Japanese government, which initially supported the US company’s involvement, said one of the people familiar with the matter.

Western Digital filed for an injunction to block the sale this week, requesting the auction be put on hold while it pursues arbitration claims against Toshiba. “Toshiba has no right to offer to transfer its joint venture interests to a third party and has no ability to enter into any transaction with a third party without obtaining our consent,” Western Digital said in a statement.

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