Toshiba Picks Bain-Japan Group as Preferred Chip Unit Buyers

Toshiba picked a group led by Bain Capital and Japanese investors as the preferred bidders for its memory chip business, bringing much needed cash into the Japanese company to make up for losses in its nuclear operations, according to Bloomberg.

The parties are aiming to reach final agreement by June 28 and close the transaction by March, Toshiba said in a statement. The consortium has indicated that it’s willing to pay 2.1 trillion yen ($19 billion) for the semiconductor unit, people with knowledge of the matter have said.

Backing for the bid by state-supported Innovation Network Corp. of Japan and Development Bank of Japan are considered essential for winning government approval for an acquisition. Economy, Trade and Industry Minister Hiroshige Seko said he welcomes Toshiba’s decision on the bid, following the announcement.

Although the chip unit is Toshiba’s crown jewel, the Tokyo-based company will be left with more than 600 different businesses. Their Westinghouse nuclear division has filed for bankruptcy after losses piled up from project delays, forcing Toshiba to predict an annual loss of 1.01 trillion yen. All of this is a humiliating predicament for one of Japan’s oldest businesses, which made the country’s first light bulb and grew into a behemoth that made everything from washing machines and medical equipment to laptops and nuclear plants.

“Toshiba has determined that the consortium has presented the best proposal, not only in terms of valuation, but also in respect to certainty of closing, retention of employees and maintenance of sensitive technology in Japan,“ the company said in the statement.

While Bain, INCJ and DBJ will contribute cash and equity, South Korean chipmaker SK Hynix will join the group by providing only loans to avoid antitrust hurdles, a person familiar with the matter said. Toshiba didn’t mention Hynix in a statement. INCJ confirmed Toshiba’s decision in an emailed statement and said it’s working with the consortium to finalize the details of the deal. The other leading contender was U.S. chipmaker Broadcom, which made an offer of about 2.2 trillion yen, according to people with knowledge of the matter.

The closing of the deal may be complicated by objections from  Western Digital, which jointly owns certain chip assets with Toshiba. The U.S. company has sought to prevent the business falling into the hands of rivals and opposed Broadcom in particular. Western Digital reiterated that Toshiba is violating its rights and that it will press forward in seeking an injunction against a sale of the chip unit.