Could Toshiba turn its back on $18 billion chip unit sale?

A Toshiba shareholder has told the firm that the sale is not necessary
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There’s never a dull moment at Toshiba. Just when everything looked like it had settled down, a shareholder comes out of the woodwork and throws a fresh spanner into the works.

According to Reuters, a Hong-Kong based investor has told Toshiba directors to pull out of its $18 billion sale of its chip unit to a consortium led by Bain Capital and including Apple. The shareholder claims that due to a recent capital injection, the funds are no longer needed.

According to Reuters, Argyle Street Management Ltd, a hedge fund with $1.2 billion under management, sent the letter to Toshiba’s board urging it to pull out of the sale. Argyle is also calling on the 30-plus overseas investors who participated in Toshiba’s recent 600 billion yen ($5.3 billion) new share issue to team up and is already in talks with at least three funds who share the same view, Chan said.

Argyle believes ‘there no longer is any urgency to undertake a sale of Toshiba Memory’. It added: “The $18 billion price tag for the chip unit significantly undervalues the business.”

It comes as Toshiba readies itself to tie up an agreement with Western Digital to avoid legal action over the sale of its memory unit. According to reports, the two parties have agreed to settle the dispute over Toshiba’s $18 billion sale of its chip unit. The settlement on the table calls for Western Digital to drop arbitration claims seeking to stop the sale in exchange for Toshiba allowing it to invest in a new production line for advanced flash memory chips that is slated to start next year.

Toshiba was forced to put the memory unit - the world’s no. 2 producer of NAND chips - on the block to cover billions of dollars in liabilities arising from its now bankrupt U.S. nuclear power unit Westinghouse.

After seven months of negotiations, lawsuits, twists and turns, Toshiba bosses finally penned an $18 billion deal for its chip unit, paving the way for a consortium led by Bain Capital and Apple to take over its memory unit. The deal looked like it was done some time before but Apple demanded new terms at the last minute sparking doubt that the deal would be complete. The consortium also includes SK Hynix, as well as Dell, Seagate Technology and Kingston Technology. Toshiba took the decision to sell off a number of its valuable assets after its nuclear arm Westinghouse was declared bankrupt after racking up insurmountable debt.

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