Toshiba chip unit sale in doubt as Western Digital begins legal action

Western Digital has begun legal action to block its partner Toshiba from selling off its profitable chip unit
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Western Digital has begun legal action to block its partner Toshiba from selling off its profitable chip unit. The US firm has sought an international arbitration to stop any deal going ahead, derailing Toshiba’s plans to recoup a much-needed financial injection. After announcing a multi-billion dollar loss and declaring its nuclear arm Westinghouse bankrupt, Toshiba has been trying to offload its valuable assets.

Toshiba and Western Digital currently jointly operate Toshiba’s main semiconductor plant. Western Digital is in fact one of the parties interested in acquiring the chip unit from Toshiba, however the firm has reportedly put in a much lower offer than offer suitors. The legal wrangling could now scupper any deal for Toshiba, effectively losing them $18 billion. Private equity firm KKR, Taiwan’s Foxconn and US chipmaker Broadcom are all said to be willing to fork over the asking price.

Western Digital’s decision to take legal action comes after months of souring relations which have threatened to bubble over. Just last week, Toshiba issued a letter telling Western Digital to ‘not interfere’ with the sale. The letter read: “Western Digital's campaign constitutes intentional interference with Toshiba's prospective economic advantage and current contracts. It is improper, and it must stop.” Toshiba has also accused Western Digital of failing to sign joint venture agreements. Giving them a deadline of May 15, Toshiba has threatened to suspend Western Digital staff from all of its unit’s facilities, networks and databases if the agreement is not signed.

However, that ploy seems to have back-frired for Toshiba, with Western Digital initiating arbitration procedures with the International Chamber of Commerce today. It is demanding Toshiba reverse a move to put its joint venture assets into a hived out entity - Toshiba Memory - and that it stop an all-out sale without consent from Western Digital unit SanDisk.

Toshiba however, is adamant that it is not breaching any legal contract by selling off the chip unit without Western Digital’s blessing. A possible solution, could see Western Digital join the Japanese government’s consortium of business, reportedly said to lining up an offer for the chip arm. 

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