Toshiba gets approval to sell its memory business for $18 billion

Troubled Japanese firm Toshiba Corporation has gotten the final stamp of governmental approval it needed to sell off its memory chip business, known as Toshiba Memory Corporation (TMC). In a statement released today, Toshiba says the final sale of all TMC shares to K. K. Pangea will happen on June 1. The sale price comes out to ¥2 trillion, or around $18 billion.

If (like I was) you're wondering who K. K. Pangea is, you can more or less think of it as “that company that bought TMC.” K. K. Pangea was specifically formed to be the front-end of a group led by Bain Capital that includes SK Hynix, Apple, Dell, Seagate, Kingston, and Japanese medical technology firm Hoya, as well as Toshiba Corporation itself, who is reportedly re-investing ¥350 billion ($3.1 billion) in the unit.

Despite the change in ownership, TMC will remain a Toshiba Corporation subsidiary. As a result, it seems the sale won't immediately affect day-to-day operations for the company. To satisfy Japanese regulators, the group agreed to give Toshiba Corporation and Hoya “more than 50% of voting power,” according to TechCrunch.

Bloomberg notes that the Chinese Ministry of Commerce was delaying its regulatory approval due to concern regarding SK Hynix's involvement in the deal. That may be the reason why the final agreement restricts SK Hynix from access to TMC's intellectual property. For whatever reason, the Chinese officials ultimately gave their approval. That was the final roadblock in the sale that will now proceed next month.

Western Digital attempted to block Toshiba from selling the unit, and failing that, attempted to throw its weight behind a competing offer from two investment firms backed by the Japanese government. There were provisions in the deal to adjust the offer if WD pursued litigation against TMC, but since the sale is proceeding at the original price, WD may have abandoned that cause.

Toshiba Corporation was forced to sell off TMC due to extreme financial stress caused by the failure of its US nuclear power venture. The company's Westinghouse Electric unit filed for bankruptcy last year after billions of dollars of cost overruns halted construction of four new nuclear reactors. The fallout from the failure of Westinghouse was so great that Toshiba, who first invented NAND flash technology in 1987, had to negotiate the sale of TMC just to stay afloat.

Comments closed
    • just brew it!
    • 1 year ago

    I’m gonna tentatively say that this sounds like a win for consumers. If TMC had exited the market or merged with another big producer, that would’ve reduced competition.

    Hopefully this deal isn’t leveraged to the hilt, as this could cause more trouble down the road.

      • fyo
      • 1 year ago

      TMC would never have exited the market. Toshibas memory division wasn’t underperforming. This was a case of Toshiba selling its golden goose to cover for other problems, as detailed in the article.

      Short term, this will change little in the NAND space. Longer term, I cannot help but wonder how much money that consortium is going to take out (e.g. in the form of dividends). This is money that Toshiba would have normally had to evolve it’s NAND business. Less investment will likely mean falling (further) behind.

    • uni-mitation
    • 1 year ago

    This deal is tentatively good news for all consumers in the NAND Memory space

    1- The consortium behind this deal includes companies with rival interests to that of Samsung, including Apple ponying up a substantial amount. From the Techcrunch article:

    [quote<]The deal is an important one, not just for Toshiba, but for the wider tech industry. Apple, for one, fears that rival Samsung, already the largest player in the memory space with 40 percent marketshare, could profit from the issues at Toshiba. It’s involvement in the bid — reportedly to the tune of $7 billion — centers around keeping the industry competitive. [/quote<] 2- We are not privy to the contract between the parties. As part of the deal, Toshiba, the parent company, will continue to have majority voting power on its minority share subsidiary, Toshisha Memory Corporation. See techcrunch article. 3- Typically, there are different types of shares. As of now, Toshiba Memory Corporation is a wholly-owned corporation of Toshiba Corporation (the group). It is my educated guess that if the group has to maintain majority voting stake, then the consortium will be given the majority of [url=http://www.investorguide.com/article/11166/stock-classes-the-difference-between-common-stock-and-preferred-stock-igu/<] preferred stock [/url<] which basically entitles you to get first dibs on any dividends typically at a fixed rate, plus possibly "non-voting" common stock making the difference. Every corporation's stock offerings, splits, and etc are different and obviously subject to corporate board approval based on its corporate by-laws. 4- Therefore, it is reasonable to assume that it will be business as usual with the same board members and corporate direction of the Toshiba group. It will continue keeping a check to Samsung's Nand Flash hedgemony in the market which is why Apple, and all these other rivals of Samsung are forking this amount of money. 5- So in a sense, Apple is a good guy in this case with the rest of the consortium members. Credit due when it is due. Bain was the brains behind putting together this deal, getting regulatory approval, and most likely closing this deal. Their interests are simply turning a profit to those that ponied all of this money by selling their stakes later down the road once Toshiba recovers to its almost-catastrophic nuclear ventures. 6- This deal, in my opinion, is therefore good news for the interests of consumers in the NAND space. It is a competitive space thanks to minority players like Toshiba that continue to compete for our hard earned dollars. Up to now, I have yet to see any evidence or indicators that Toshiba is looking to surrender or play nice with Samsung or for this to end up in a semi-quasi cartel like in the DRAM market. uni-mitation

    • blastdoor
    • 1 year ago

    Everyone who has laughed at Apple customers paying ridiculously high prices for extra RAM through Apple’s online store might not be laughing much longer — we may all be paying those prices before all is said and done.

      • frenchy2k1
      • 1 year ago

      1. This is for NAND flash, not DRAM
      2. Both are commodities and, excluding collusion, their price are mostly driven by offer/demand.
      Flash had a spell o high prices due to:
      a. increased demand (more memory in cell phone and SSD demand)
      b. disruption of supply due to transition from planar NAND to 3D NAND

      the transition is now almost over and manufacturers are again ramping up volumes of now 3D NAND. This is why the prices of SSD have been falling again.

      Apple charging their over-inflated price for their storage increase is mostly unrelated to this and a conscious decision for the sake of high margins…

    • tay
    • 1 year ago

    SK Hynix Concern was because they would own too much of the memory market.

    So we have Samsung, SK Hynix, Toshiba, and Intel/micron? that still make flash ram. Is there anyone missing? Is DRAM even worse?

      • JustAnEngineer
      • 1 year ago

      [url<]https://www.statista.com/statistics/275886/market-share-held-by-leading-nand-flash-memory-manufacturers-worldwide/[/url<] 38% Samsung 17% Toshiba 16% Western Digital 11½% Micron 11% SK Hynix 5½% Intel

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