Toshiba Chip Sale Talks Are Said to Stall On Payment Timing

Toshiba’s talks to sell its chips business to a consortium led by Bain Capital hit an impasse over the timing of payments for the business and governance issues, according to Bloomberg, citing people familiar with the matter. It is casting doubt on the company’s ability to complete a deal quickly.

The Bain group wants to make cash payments after Toshiba resolves a legal dispute with Western Digital, while Toshiba wants the money earlier, said the people. Toshiba President Satoshi Tsunakawa said last week the company would hold talks with other possible acquirers because it hadn’t been able to reach final terms with the the Bain group, which had been designated the preferred bidder, without explaining the reasons.

The Japanese icon is preparing for delisting even as it tries several strategies to complete the chip sale in time, the people said. On one hand, the company is putting pressure on Western Digital to withdraw its complaint, threatening to cut off access to future chip production the U.S. company needs. On the other, Toshiba is considering alternative bidders such as Foxconn.

Tsunakawa, who had originally said he planned to have a definitive agreement by June, said during a press conference after earnings last week that the company wants to avoid delisting. “The basic motivation for staying listed is that we do not want to inconvenience our shareholders and investors,“ he said. “When it comes to delisting, we also need to consider the negative impact it would have on broader markets.“

He added that Toshiba remains open to cooperation with Western Digital if the two companies can find common ground. Toshiba needs to reach final deal terms by late August or early September to be able to close the sale by March, after antitrust and other government reviews, the people said. “We will make the best effort to avoid Toshiba’s delisting,“ said Hirokazu Tsukimoto, a Toshiba spokesman.

Toshiba is selling its prized semiconductor business, which makes storage chips for everything from iPhones to data centers, to pay for a devastating foray into the U.S. nuclear business. The company had to take the multi-billion writedown because of project delays and cost overuns at its Westinghouse Electric unit. The business has filed for bankruptcy in the U.S.