Chip giants fail to reach a deal

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Chip giants fail to reach a deal

SK Hynix said Wednesday that it does not intend to pull out of its bid to acquire equity in Toshiba’s memory unit despite the Japanese conglomerate reopening talks with U.S. and Taiwanese bidders.

According to a media report from Japan-based Nikkei on Wednesday, Toshiba said it has reopened talks with Western Digital and Hon Hai Precision Industry, known as Foxconn, at a briefing held with its key creditor banks on Tuesday.

Toshiba had selected a consortium involving public-private Innovation Network Corp. of Japan, the state-run Development Bank of Japan, U.S. Bain Capital and SK Hynix as priority bidder for Toshiba Memory on June 21 with the aim of finalizing the agreement by June 28. However, the process took longer than expected due to controversies surrounding the role of the Korean chipmaker in the consortium.

SK Hynix CEO and Vice Chairman Park Sung-wook said at an unofficial meeting with reporters on Wednesday that cooperation between SK Hynix and Toshiba has a long history and that the two companies are currently discussing how to make this a win-win deal. When asked if there was a possibility of SK completely pulling out of the bid, Park said “No.”

Park also confirmed that SK intends to continue negotiating for equity in Toshiba.

While Toshiba and the Japanese government have been keen on keeping Toshiba’s technology and jobs inside the country, SK Hynix’s participation in the consortium has raised concerns of a possible technology leak.

Responding to concerns, Toshiba President Satoshi Tsunakawa had assured the public last month through a press briefing that “[SK Hynix] won’t have voting rights or be involved in management.” Tsunakawa also emphasized that the Korean company’s role will be limited to financing.

However, after it was revealed that SK Hynix’s investment would be made in convertible bonds, concerns resurfaced. The convertible bonds open up the possibility that SK could later acquire some or all of the voting rights Bain Capital holds.

Insiders say there’s not much chance of Toshiba inking a deal with Western Digital or Hon Hai. Western Digital won’t be free from antitrust reviews after acquisition. As for Hon Hai, the Japanese government remains cautious over concerns of technology leaks.

While Toshiba is in a hurry to finalize sales before its fiscal year ends in March next year, the bid is only getting more complicated as Western Digital won a temporary U.S. court order Tuesday saying Toshiba must allow the hard drive maker’s employees to access databases and chip samples.

The U.S. company asked the court for a separate order to stop the sales process. A hearing on the injunction to stop the sale is scheduled on Friday.

“We have nothing to say about the case right now but we will closely watch over the results to be released on Friday,” a spokesperson from SK Hynix said.


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