WDC Western Digital Corporation

Western Digital says it can prevent any sale affecting companies' chip-making venture

By Takashi Mochizuki 

TOKYO -- Western Digital Corp. has told Toshiba Corp. it believes it can block any Toshiba sale affecting their joint venture making semiconductors, a person familiar with the matter said, a new headache for the struggling Japanese company.

Toshiba warned Tuesday that it might not be able to survive after huge losses at its U.S. nuclear unit Westinghouse Electric Co., which filed for bankruptcy last month. Toshiba said its survival plan centers around selling its profitable semiconductor unit, which makes NAND flash-memory chips used for data storage in smartphones, computers and other electronics products.

On April 1, Toshiba carved out the semiconductor unit into a separate company in preparation for the sale. Among the unit's assets is a stake in a semiconductor factory in Yokkaichi, Japan, that Toshiba jointly operates with Western Digital.

In a letter to Toshiba management, Western Digital said the joint-venture contract prohibits each party from selling its stake without approval from the other, said a person briefed on the letter. The letter expresses concerns about Toshiba's willingness to field offers from companies other than Western Digital and threatens legal action if Toshiba doesn't heed Western Digital's concerns, this person said.

The letter was earlier reported by Reuters.

A spokeswoman at SanDisk, the U.S. chip company that initially made the joint-venture deal with Toshiba and was acquired last year by Western Digital, confirmed that Western Digital had sent a letter to Toshiba but declined to discuss its contents. A spokeswoman for Toshiba said the Tokyo company briefed Western Digital about plans for the chip unit before the April 1 spinoff and declined to comment further.

People familiar with the matter said earlier this week that Foxconn Technology Group of Taiwan has offered as much as Yen3 trillion ($27 billion) for full control of the Toshiba chip unit. They have said Toshiba also received bids from SK Hynix Inc. of South Korea and U.S.-based Broadcom Ltd.

Western Digital made an offer but at a lower price than the other bidders, a Toshiba official said. The person who was briefed on the Western Digital letter said it might be a negotiating tactic to gain Toshiba's crown jewel at a discount price.

Toshiba Chief Executive Satoshi Tsunakawa has said the most important factor in selecting a buyer for the chip unit is the amount of the offer, followed by the buyer's ability to close the deal quickly.

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com

(END) Dow Jones Newswires

April 13, 2017 02:47 ET (06:47 GMT)

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