Group with SK Hynix lands Toshiba bid

Japanese chipmaker Toshiba said Wednesday it had selected a consortium led by a state-backed Japanese investment fund as the preferred bidder in the sale of its lucrative flash memory business.

The consortium to purchase the world’s second-largest producer of flash memory chips, also known as NAND, includes the Innovation Network Corporation of Japan, U.S. private equity fund Bain Capital and the Development Bank of Japan.

Korean chipmaker SK Hynix is a minor partner in the consortium as a lender, alongside Japan’s Mitsubishi UFJ Financial Group.

The consortium “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 within Japan,” Toshiba said in a statement Wednesday.

The company added it intends to reach a “mutually satisfactory” agreement with the consortium by June 28, when its annual shareholders meeting is scheduled.

SK Hynix did not release an official statement on Toshiba’s decision, but a spokesman confirmed for the first time that the company has a role in the bid as a lender. Before, the semiconductor manufacturer refrained from offering comments due to a confidentiality agreement.
SK Hynix appears to have opted to maintain a low key role because it is not directly acquiring Toshiba’s memory business.

“It would be too farfetched to say that we are becoming a new owner of Toshiba’s memory business as a number of Korean media outlets have described,” the SK Hynix spokesman said. “But the sale is definitely opening the door for us to seek a new opportunity. Our role is liable to change — either toward big or small — depending on future negotiations.”

SK Hynix, the chipmaking arm of Korea’s third-largest conglomerate, SK Group, is reportedly contributing 300 billion yen ($2.7 billion) to gain about a 15 percent stake in the unit that Toshiba hopes to close as soon as possible, by March 2018 at the latest. The company wants to prevent its shares from delisting on the Tokyo stock exchange due to massive losses from Westinghouse, a U.S. nuclear energy company it acquired in 2006.

The Japan-U.S. consortium is known to have proposed more than 2 trillion yen ($18 billion), compared to 2.2 trillion yen offered jointly by U.S. semiconductor heavyweight Broadcom and investment fund Silver Lake.

Toshiba was widely speculated to announce the bidder a week earlier but pushed back the date due to last-minute variables including new bidding participants and U.S. chipmaker Western Digital’s filing of an injunction suit to block the deal.

SK Hynix is the largest producer of DRAM chips after Samsung Electronics but stands at fourth when it comes to NAND chips, which are mostly embedded in smartphones and personal computers.

As of the first quarter, Samsung Electronics dominates the NAND market with 36.7 percent, followed by Toshiba with 17.2 percent, Western Digital with 15.5 percent and SK Hynix with 11.4 percent, according to market research firm IHS Markit.

Analysts believe SK Hynix’s role in the Toshiba memory deal will lay a cornerstone for the Korean conglomerate to raise its competitiveness in NAND and increase its share in the market long term.

“SK Hynix and Toshiba are expected to create synergy — in terms of both facility expansion effects and facilitated raw materials procurement,” said Kim Kyung-min, an analyst at Daishin Securities.

On upbeat prospects surrounding the Toshiba news, shares of SK Hynix posted a record-high price on Wednesday of 64,800 won ($57), up 1.25 percent from the previous trading session.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]