Tue, Apr 11, 2017 page12

• Foreign bidders aggressive in Toshiba chip sale

  TOUGH CUSTOMER: Although the Japanese government wants to keep the chip business domestic, bidders such as Hon Hai have posted enormous preliminary bids

  • Bloomberg
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  Toshiba Corp and the Japanese government want to sell the firm’s semiconductor business to a domestic buyer, but foreign bidders are proving more determined and aggressive as the auction heads toward a final decision in the coming weeks.

  Hon Hai Precision Industry Co (鴻海精密), South Korea’s SK Hynix Inc and Broadcom Ltd have all submitted preliminary bids for the Toshiba business valued at ￥2 trillion (US$18 billion) or more, people familiar with the matter said.

  Hon Hai has indicated it might pay as much as ￥3 trillion, in part to force Japanese management into negotiations, said one of the people, who asked not to be identified because the matter is private.

  Hynix is in talks with Japanese investors on a joint bid, in part to overcome political hurdles, the person added.

  Toshiba and government officials are planning to seek offers led by Japanese acquirers, though none have emerged yet, people familiar with the matter have said.

  The company could seek a bailout through what is known as hougacho-hoshiki, or a form of community financing in which multiple domestic companies contribute a small amount of capital, one person said.

  Fujifilm Holdings Corp might consider participating once it understands the investment framework, firm spokesman Takao Aoki said.

  Toshiba is selling off assets as it grapples with billions of dollars in losses from its Westinghouse nuclear division.

  The Tokyo-based electronics conglomerate has more than 600 different businesses, but its most valuable asset is the semiconductor business, which makes flash-memory chips used to store data in cellphones and other devices.

  Toshiba spokesman Yukihito Uchida declined to comment, as did Hynix and Hon Hai representatives.

  Broadcom did not immediately respond to requests for comment, and an official at the government department overseeing the sale was not available.

  The Japanese government has made no secret of the fact that it wants to keep the business in the country, citing the strategic importance of chip manufacturing in future technologies.

  Japanese Chief Cabinet Secretary Yoshihide Suga has said flash memory chips are “extremely important” for Japan’s growth strategy.

  So far though, foreign bidders seem more likely to land the deal.

  Hon Hai, led by chairman Terry Gou (郭台銘), has proven particularly aggressive, much like when Gou faced down Japanese government opposition to win control of Sharp Corp last year.

  In that case, he also made an extremely high opening bid to pressure management into negotiations, only to later reduce his offer.

  Gou’s bid for Toshiba’s chip business faces stiff resistance in part because Hon Hai’s factories are located in China and he would likely move semiconductor manufacturing there, people familiar with the matter said, citing concerns that Hon Hai would transfer Toshiba intellectual property to China.

  Hon Hai has talked with several parties about a joint bid, but all potential partners have resisted a move to China, one person said.

  Toshiba is scheduled to report earnings today for the December quarter last year.

  Another delay, which would be its third, could affect the Tokyo Stock Exchange’s review of its qualifications for staying listed.
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