Toshiba Corp has reportedly prioritized its talks with Western Digital Corp (NASDAQ:WDC) according to sources familiar with the ongoing plan to sell its chip business.
The sources revealed that Toshiba has turned to Western Digital after negotiations with a previously preferred bidder hit a brick wall. The Japanese company is rushing to unload the chip business in a bid to recover from the losses that it suffered from its Westinghouse nuclear business in the U.S. Toshiba had prioritized a conglomerate made up of South Korean chip maker SK Hynix, private equity firm Bain Capital and Japanese government-backed funds in June. Unfortunately, the talks came to a stop after Western Digital filed a lawsuit against Toshiba.
Western Digital decided to pursue a legal battle against Toshiba arguing that the Japanese company should first seek consent for the sale. This caused the state-backed consortium to demand that the talks should be paused to allow for the dispute to be resolved. However, it looks like Western Digital stands to reap significant benefits from the current situation since it was prioritized as the potential buyer.
Western Digital will most likely drop the lawsuit should things turn in its favor. Toshiba is clearly determined to secure a sale as soon as possible and will thus work to avoid any obstacles that might hinder a sale. If the Japanese company fails to sell the unit before March 2018, its shares will be delisted from the Tokyo Stock Exchange. Western Digital simply seems to have played a dirty game so that it would be prioritized in the talks. This does not mean that the consortium that had previously been prioritized is out of the picture.
“We are still in the running and our consortium is still in talks with the seller and will continue the negotiations to take over Toshiba’s chip business,” stated SK Hynix on Wednesday.
The anonymous sources reporting on the matter also stated that Toshiba’s lenders have been aggressively pushing for a deal before August. This is because striking a deal before the end of the month would give the company room to go through regulatory procedures before March 2018.
Western Digital closed the latest trading session on Thursday at $89.45, after climbing 1.29%.
