Western Digital Moves to Block Toshiba Deal

Western Digital Moves to Block Toshiba Deal

Western Digital is taking legal action to try to guarantee a say in who gets to buy the chip unit of Toshiba, its partner in a manufacturing joint venture, according to Bloomberg.

The U.S. company invoked an arbitration clause in their business agreement, which could postpone a sale Toshiba needs to complete quickly. In preparation for the divestment, the Japanese technology company transferred ownership of the unit to a separate legal entity but didn’t get permission before doing so, according to Western Digital. The two should enter binding arbitration to resolve the dispute, Western Digital said.

Toshiba said it hasn’t received any notice of arbitration, and rejected claims that the process is in breach of the joint venture agreement. The Japanese company already responded by blocking Western Digital employees from the flash-memory venture they share. The joint venture may find itself at risk if Toshiba’s chipmaking operation is snapped up by a Western Digital competitor.

Western Digital executives have described Toshiba’s situation as desperate. “We firmly believe that we provide Toshiba with the optimal solution to address its challenges and that we are the best partner to advance its legacy of technology innovation in Japan,“ Western Digital CEO Steve Milligan said in a statement. “Toshiba’s attempt to spin out its joint venture interests into an affiliate and then sell that affiliate is explicitly prohibited without SanDisk’s consent.“

Toshiba previously told Western Digital not to interfere in the sale plans and that it may take legal action. It also said the U.S. company failed to formalize their relationship after Western Digital became its-flash memory manufacturing partner after the acquisition of SanDisk last year. Toshiba said the two companies must come to an agreement by May 15 or it would bar Western Digital employees from its facilities and networks.

Arbitration will take place in San Francisco, Western Digital said. Each side will propose one member of the three-person panel. The third, who will serve as chairman, will be chosen by either the two other members or the International Chamber of Commerce, which will oversee the arbitration. The process can take as long as a year. Any move that undermines arbitration, such as a sale of the unit before the panel reaches a decision, could allow the issue to go to court.