Bain Capital buys Toshiba chip unit

Japan’s Toshiba Corp agreed yesterday to sell its prized semiconductor business to a group led by US private equity firm Bain Capital LP, a key step in keeping the struggling Japanese conglomerate listed on the Tokyo exchange.

In a last-minute twist to a long and highly contentious auction, Toshiba said in a late-night announcement through the exchange it agreed to sign a contract for the deal worth about 2 trillion yen (US$18 billion).

The decision to sell the world’s No. 2 producer of NAND memory chips was made at a board meeting earlier yesterday.

Late on Tuesday, sources had said Toshiba was leaning toward selling the business to its US joint venture partner Western Digital Corp.

It’s unclear whether the sale to the Bain Capital-led group will proceed smoothly, as Western Digital has previously initiated legal action against Toshiba, arguing that no deal can be done without its consent due to its position as Toshiba’s joint venture chip partner.

Toshiba said the agreement assumes the deal would weather legal challenges raised by Western Digital.

A Western Digital spokeswoman said the company did not have an immediate comment.

Toshiba said the sale will boost its finances by 740 billion yen after taxes. That would pull it out of negative shareholder equity, a key step it aims to achieve by March to remain listed.

Bain Capital has partnered with South Korea’s SK Hynix Inc and brought in US buyers of Toshiba chips such as Apple Inc and Dell Inc to bolster its bid. Memory product maker Kingston Technology and data storage firm Seagate Technology Plc are also part of the group.

The Toshiba announcement referred to a group with foreign companies, but did not cite SK Hynix. Rather, it said two Japanese state-backed investors — the Innovation Network Corp of Japan and the Development Bank of Japan — were considering a future capital tie-up. Bain had previously invited the two into the group, sources have said.

Without a sale, Toshiba won’t have the billions of dollars it needs to plug a hole in its finances caused by its now bankrupt US nuclear unit Westinghouse, and could be delisted.