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Toshiba sells memory business to Bain-led group for US$18 billion

By Michael Low & Kenny Yeo - on 26 Sep 2017, 9:00am

Toshiba sells memory business to Bain-led group for US$18 billion

Image source: Reuters.

After a protracted period of negotiations, drama, and twists, Toshiba has finally announced the decision to sell its lucrative flash memory business to a consortium led by Bain Capital for US$18 billion.

Toshiba is forced to sell its flash memory business after its American nuclear power division, Westinghouse Electric, filed for bankruptcy.

The consortium, led by private equity firm Bain Capital, includes Apple, Dell, SK Hynix, and Japan's Hoya Corp. Insiders say that Apple played a crucial role in the group securing the deal.

Apart from having humongous resources, Apple is also interested in the deal because it allows them to secure a supplier for flash memory, which is used in just about every one of its devices from iPhones to iPads to Macs.

In addition, two Japanese state-backed institutions – the Innovation Network Corporation of Japan and the Development Bank of Japan – will join on as investors once certain criteria are met.

However, the deal is still subjected to antitrust scrutiny, and also objection by Western Digital. 

Western Digital owns part of Toshiba's memory business, and it believes that it should have a say in any deal. The company has also made a bid for Toshiba's memory business, but its offer has been turned down.

Toshiba has disputed this and has sued Western Digital for more than US$1 billion for its interference.

In response to this deal, Western Digital has issued a statement saying that they are 'disappointed'.

Finally, there are some concerns that this deal could lead to higher memory prices, and therefore more expensive devices.

Often, private equity groups are concerned with recouping their investments quickly, and they could be tempted to increase memory prices, which would lead to more expensive devices.

Apple, for example, recently increased prices of some iPad Pro models in response to higher costs of flash memory.

Toshiba is the world's second largest manufacturer of flash memory, behind only Samsung, with a market share of around 30 percent.

Source: Bloomberg, Financial Times.