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SK Hynix bid in Toshiba deal halted

Consortium leader tells chip maker to give up voting stake
July 17,2017
The already hazy direction of the sale of Toshiba’s memory chip business became more unclear as the Innovation Network Corp. of Japan, a leader of the consortium that was named the preferred bidder in the deal, threatened SK Hynix, one of the consortium members, to give up its voting stake in the Japanese company last Friday.

INCJ’s Chairman and CEO Toshiyuki Shiga warned at the same time he won’t sign the deal if any change is made to the acquisition framework proposed for an INCJ-led international consortium.

The message from Shiga came almost three weeks after Toshiba picked a consortium led by a state-backed Japanese investment fund that consists of Bain Capital, SK Hynix and Japanese-government banks as the preferred bidder in the sale of Toshiba Memory. The international consortium offered 18 billion won ($15.9 million).

The chip-making unit of Korea’s third-largest conglomerate SK was initially known to be merely taking the role as a lender for Bain Capital but it later demanded that it receive a voting stake in the Toshiba’s flash memory unit.

Shiga noted that a voting stake for SK Hynix was not included in the consortium’s framework when INCJ won approval to participate, according to Japan’s JiJi Press on Saturday.

SK Hynix’s next move is still unknown, amid mixed speculations. JiJi Press reported on Friday that the SK subsidiary has dropped its demand for voting rights, citing informed sources.

But SK Group Vice Chairman Park Sung-wook told reporters last Wednesday that the company is still “in talks over acquiring the stake” in Toshiba Memory. For SK Hynix, taking a stake in the Toshiba unit means being able to make management decisions, but that scenario raises concerns for Toshiba about technology leaking to its rival and antitrust hurdles that would require a review - another drag for the sale.

SK Hynix refused to confirm any of the media reports concerning the deal.

Toshiba is in a hurry to reach a final agreement and close the deal by March 2018 to prevent its shares from delisting on the Tokyo stock exchange due to the massive losses from its nuclear energy unit.

Western Digital, Toshiba’s joint chip production partner, also objects to any sale of Toshiba Memory to a third party without its consent on the grounds that it runs afoul of joint-venture agreements. The American chipmaker asked the Superior Court of California to block the deal and a judge at the court did not give a ruling in a hearing on Friday. A new hearing is scheduled for July 28.

In the meantime, Toshiba has reopened talks with suiters including Foxconn, the world’s No. 1 contract electronics maker, formally known as Hon Hai Precision Industry. Toshiba vowed in a statement last Friday to proceed with negotiations and contract signing.


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