For Toshiba chip bid, Bain-Japan team ideal financial match
US fund seen as more cooperative partner than Western Digital
TOKYO -- Bain Capital has managed to cobble together an alliance that offers more than 2 trillion yen ($18.3 billion) for Toshiba's semiconductor memory unit, a proposal that rivals a competing bid by U.S. semiconductor heavyweight Broadcom.
The U.S. investment fund and its partners, including the private-public Innovation Network Corp. of Japan and the Development Bank of Japan, are slated to make an offer ahead of a Thursday meeting, where Toshiba's management will consider bids for Toshiba Memory.
Bain, for its part, has been vying for the operations since February. In the second round of bidding, which closed on May 19, the fund teamed with South Korea's SK Hynix and Toshiba Memory executives on a management buyout proposal. But the South Korean flash-memory maker could not invest directly in the business due to antitrust concerns, and the offer price fell short of the 2 trillion yen Toshiba sought.
Team Japan, on the other hand, had explored an alliance with U.S. private-equity fund Kohlberg Kravis Roberts and American hard-drive maker Western Digital, which produces flash memory with Toshiba. But it could not smooth over differences with Western Digital, which is pursuing international arbitration against Toshiba to keep the memory unit from being sold to any third party. And its offer price again failed to clear the 2 trillion yen mark.
The new alliance has the twin advantages of excluding the difficult American partner and better fitting Toshiba's price demands. But KKR and Western Digital have not yet given up: the chipmaker is considering raising its contribution to raise its communal bid above 2 trillion yen.
Western Digital could push back if SK Hynix, a competitor, is significantly involved in the new bid. Clearing antitrust screening could also pose hurdles, depending on exactly what role the South Korean chip manufacturer plays. For now, the company looks to lend support in the form of loans.