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Broadcom bid for Toshiba Memory Business – report

Bain and KKR also get stuck into Tosh flash biz sale

By Chris Mellor, 19 May 2017

Broadcom is gearing up to deliver a $20bn (2.2 trillion yen) bid for Toshiba’s Memory Business, reports Bloomberg.

The Memory Business was put on the auction block so Toshiba could recapitalise after facing potentially company-destroying losses from its US nuclear power station business, which has filed for Chapter 11 bankruptcy. There’s more background information here and in the articles at the foot of this page.

Broadcom has financing from Silver Lake and three Japanese Banks – Mizuho Financial Group, Sumitomo Mitsui Financial Group, and Mitsubishi UFJ Financial Group.

A bidding group led by Kohlberg Kravis Robertso including the Japanese government backed Development Bank of Japan and the Innovation Network Corporation of Japan (INCJ), are going to bid around 1.8 trillion yen (about $16.36bn). Apparently WDC has been offered a 20 per cent share in the Memory Business stake that this group would buy, but wants more.

However the Nikkei reports that the INCJ has not decided to join with KKR and may go with an alternate Bain-led group.

Bain Capital may also join with SK Hynix, and bid for just 51 per cent of the business, more than 1 trillion yen (about $9bn). SK Hynix would contribute cash but have no direct involvement to simplify regulatory approval. Bain could also potentially join with WDC.

If it gets implied Japanese government support the KKR bid would look stronger than its lower cash offer would suggest. Ditto a Bain-led group.

Apple is still pondering participation in the Toshiba bid process; it is using Toshiba chips in its products.

Hon Hai (Foxconn), which would face Japanese government opposition is the other bidder, offering up to $27bn. And WDC’s arbitration filing is also a massive factor in the various bidder’s calculations. How massive depends upon Toshiba’s response, meaning whether it can realistically reject it has to submit and face bid process delay beyond its Tokyo stock exchange reporting deadline, the end of its current financial year in March 2018.

So far it has caused a 700 billion yen ($6.3bn) credit line halt at Toshiba. A potential workaround involves stronger collateral pledging by Toshiba. ®

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