Toshiba and Western Digital settle legal dispute

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Toshiba and Western Digital settle legal dispute

Toshiba and Western Digital settled a legal dispute over the Japanese giant’s sale of its memory chip unit to a consortium led by Bain Capital, the two companies said in a statement on Wednesday.

The two business partners in the flash memory business agreed to withdraw all pending litigation and arbitration, removing the last hurdle to an $18 billion deal that has been pending since September. Toshiba, the world’s second-largest producer of NAND chips, wants to sell the unit to fill a massive hole in its balance sheet generated by losses from its U.S. nuclear business by the end of its fiscal year next March.

The consortium includes SK Hynix, Korea’s second-largest chipmaker, as well as the public-private Innovation Network Corp. of Japan and the state-backed Development Bank of Japan. The semiconductor unit of Korea’s third-largest conglomerate is investing 395 billion yen ($3.4 billion), part of which will come in the form of convertible bonds. That could allow the SK subsidiary to take an equity stake of up to 15 percent in the Japanese chipmaker in the near term.

“The parties’ agreement to resolve all outstanding disputes ensures that all parties are aligned on Toshiba’s sale of Toshiba Memory Chip to K.K. Pangea, a special purpose acquisition company formed and controlled by a consortium led by Bain Capital Private Equity,” the joint statement said.

“Toshiba remains on track to complete our transaction with the consortium led by Bain Capital by the end of March 2018,” Yasuo Naruke, CEO of Toshiba Memory, said in the statement.

The compromise came after Western Digital, an American hard-drive manufacturer upset by Toshiba’s move to sell the unit, filed a request for arbitration with an international court, demanding exclusive negotiation rights, in May. It went on to file an injunction with a U.S. court to block the sale of the memory arm in July and formed its own consortium a month later.

In addition to resolving “ongoing disputes,” the two companies recommitted to their ongoing flash memory collaboration and future rounds of investment in Fab 6, a memory chip fabrication plant under construction in Yokkaichi, Japan. Other agreements made on Wednesday include Western Digital’s participation in a new flash wafer fabrication facility which will be constructed in Iwate, northern Japan, and extending joint ventures that were slated to expire from 2021 to 2027.

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