Toshiba Chip Unit Sale for $18 Billion signed, but Discord Is Present

Toshiba Corp announced on Thursday that it signed a deal for $18 billion with a consortium that is led by Bain Capital for the sale of its chip unit, which overcame a key, but not last, hurdle as it is scrambling to find funds to fend off a possible delisting.

However, in a sign that was disconcerning a new conference in Tokyo was cancelled with Bain saying a consensus could not be reached by the consortium on whether it should brief the media.

This underscores worries that the groups of eight members contained too many interests that compete against one another for it to be fully workable.

The sale of the chip unit, the second largest producer in the world of the NAND chip, was agreed to last week following a long auction process but the signing of the deal was delayed due to one consortium member, Apple Inc., demanding additional terms in the chip supply.

The consortium has many members that makes it difficult to come to a consensus and agree upon who will take the initiative, said a research analyst. However, the analyst added that if the unit sale was completed successfully it would lower many risks that Toshiba has.

Although the press conference did not go off, only minutes prior to its scheduled start, the head of Japan’s Bain Capital Yugi Sugimoto, said the cancellation of the briefing did not have any bearing on the signed contract. He would not say which members of the consortium objected to the press conference.

The deal, which has legal challenges to overcome, will have Toshiba reinvest in the chip unit and together with the maker of parts for devices with chips Hoya Corp, Japanese companies will have more than 50% of the overall business, which is an important wish of Japan’s government.

A fund that is Japanese state backed and a bank have expresses interest in investing sometime in the future, but subject to conditions, said Toshiba.

Pressure from the government of Japan, changing alliances amongst suitors, and a number of revised final bids made the auction last for over nine months, which heightened the risk the deal might not close prior to the end of the financial year of Japan in March as reviews by regulators can take up to six months or more.

If the deal was not to close prior to then, Toshiba is likely to end a second straight year with a negative net worth, putting great pressure on the stock exchange in Tokyo to strip it of its status for listing.

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