Western Digital, Toshiba Reach Settlement to End Chip Fight

As part of the deal, Western Digital will invest alongside Toshiba in a new plant in Japan and receive a guaranteed supply of next-gen memory chips.

SAN JOSE, Calif. — Western Digital (NYSE: WDC) and Toshiba (OTCPK: TOSYY) announced an agreement to settle a long-running feud over the Japanese conglomerate’s plans to divest its chip unit, removing a key obstacle to the deal.

On Tuesday, Western Digital hosted a conference call to detail the settlement with Toshiba Memory, the world’s second-biggest producer of NAND chips. Toshiba agreed in late September to sell Toshiba Memory to a consortium led by Bain Capital LP for $18 billion to cover billions of dollars in liabilities arising from its now bankrupt U.S. nuclear power unit Westinghouse.

With data storage key to most next-generation technologies, demand for NAND chips has skyrocketed. Western Digital, Toshiba’s chip business partner and jilted suitor in the auction, had threatened to block any deal without its consent.

The settlement calls for Western Digital to cease arbitration claims seeking to halt the sale to the Bain consortium in exchange for Toshiba allowing the U.S. partner to invest in a new production line starting next year for advanced memory chips.

As part of the settlement, Toshiba and Western Digital will extend existing agreements for their chip joint ventures in Japan until 2027 or later. The current agreements are set to start expiring from 2021.

The ownership ratio for the joint ventures remains 50.1% for Toshiba and 49.9% for Western Digital, according the settlement terms.

The two companies also plan to enter into a definitive agreement under which Western Digital will participate in a new chip plant that Toshiba will begin constructing next year in Japan, the statement said.

The joint statement said both companies “have agreed on mutual protections for their assets and confidential information in connection with the sale of Toshiba Memory, and on collaborating to ensure the future success of Toshiba Memory as a public company following an eventual IPO.”

“We wanted to make sure that our interests in the JV [joint venture] were sufficiently protected and we had the right kind of protections and the right kind of access,” Western Digital CEO Steve Milligan said during the conference call.

Toshiba has said it hopes the chip unit sale, estimated at about $18 billion, will close by the end of March. It may have to clear further hurdles, such as possible anti-trust concerns.

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One response to “Western Digital, Toshiba Reach Settlement to End Chip Fight”

  1. After Toshiba made deal with Samsung and Apple Inc, now with Western Digital. SSD memory chips will be supplied by Toshiba to WD. First, the deal was on Hard Drives but for the betterment, SSD is chosen to be preferable.

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