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Shareholders arrive at Toshiba’s extraordinary shareholders meeting in Chiba, Japan. Source: Reuters

Toshiba’s microchip business stays in limbo after Western Digital deal failure

JAPANESE tech giant Toshiba met yet another roadblock in its efforts at finding an outside investor for its multibillion-dollar microchip business last week.

After weighing its options anew, the Asian tech giant ultimately failed yet another self-imposed deadline to complete what is estimated to be a US$17 – US$18 billion dollar deal.

Toshiba’s microchip business is widely regarded as the second largest in the world, with the firm providing NAND chips for various tech manufacturers. The Japanese firm is so prominent in the NAND industry, it is only surpassed by Samsung Electronics, which is the largest tech company in the industry.

With this, it was no surprise to see several prominent business players step forward when Toshiba announced it was looking for potential buyers for its microchip business. So far, the Japanese tech firm has narrowed its suitors down to three – a consortium of firms led by Bain Group, Western Digital and Foxconn.

California-based Western Digital is a long-standing joint venture partner in Toshiba’s main semiconductor plant in Japan. Source: Shutterstock

Over the past few months, it seemed like Toshiba was about to seal the deal with the Bain Group, a consortium of firms that included Japanese financial juggernauts Innovation Network Corporation, the Development Bank of Japan and South Korean firm SK Hynix. Back in June, Toshiba formally announced that it was already entering exclusive talks with the conglomerate.

Things took a rather dramatic turn, however, after Western Digital, an American tech giant, protested over Toshiba’s seemingly impending deal with the Bain Group. Western Digital and Toshiba currently share ownership of a huge NAND facility in Japan, though the former has a minority stake. According to the American firm, Toshiba does not have the right to sell its microchip business without consulting Western Digital first.

SEE ALSO: Delayed Toshiba earnings report reveals $8.8b in losses

Facing increasing pressure from Western Digital, Toshiba ultimately abandoned its talks with the Bain Group. In a rather ironic twist, Toshiba and Western Digital ended up resuming their attempts to reach a deal, culminating with this week’s meeting.

Earlier this week, Western Digital CEO Stephen D. Milligan landed in Japan. While the reasons behind his trip were not fully disclosed by the company, speculations were abounding that the executive headed over to Japan in an attempt to seal the deal with Toshiba.

Toshiba Corp CEO Satoshi Tsunakawa bows at the start of a news conference at the company’s headquarters in Tokyo, Japan. Source: Reuters.

Thanks to the last-ditch efforts of the Bain Group and Foxconn, however, Western Digital’s latest strategy did not bear fruit. Bain, for its part, opted to bring Apple into the mix, sweetening the deal for Toshiba. Foxconn, on the other hand, teamed up with Japan’s SoftBank Group and Google in an attempt to attract the Japanese microchip maker.

SEE ALSO: Toshiba reportedly settles on Japan-led bidder for semiconductor business

For now, the fate of Toshiba’s microchip business remains in limbo. As stated in the company’s official statement last Thursday, Toshiba, at least for the meantime, would continue negotiations with all possible bidders in an attempt to meet a preferable end for the lucrative microchip business.

“Toshiba intends to continue negotiations with possible bidders to reach a definitive agreement which meets Toshiba’s objectives at the earliest possible date, and will announce material changes in status in a timely manner.”