The struggling Japanese conglomerate said Wednesday that it had settled a legal dispute with Western Digital, the United States data storage company, that threatened to block the microchip deal. Despite the sale, Toshiba remains a major minority shareholder in the company.
The settlement calls for Western Digital to drop arbitration claims seeking to stop the sale to the Bain consortium in exchange for Toshiba allowing the US partner to invest in a new production line for advanced memory chips.
Toshiba and Western Digital announced the end to a months-long legal spat that had threatened to derail the $18 billion sale of Toshiba's flash-memory business and cut the US company off from a future supply of vital new products.
Western Digital will allow Toshiba Memory to sell its stake in the joint venture to a consortium led by Bain Capital.
He said the plan will ensure Toshiba Memory has the resources it needs to compete in the flash memory market, which is growing quickly with advances in artificial intelligence and networks for products that have internet connections, known broadly as the "internet of things".
Toshiba has bet its future on the sale.
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Toshiba is inundated with losses related to its USA nuclear operations at Westinghouse Electric Co, which filed for bankruptcy earlier this year. Toshiba's banks have been keeping it afloat, but the company needs cash to fix the damage more permanently. Toshiba is seeking to sell its profitable flash-memory unit as part of an effort to avoid having its stock delisted in Japan due to struggles at its US nuclear subsidiary, Westinghouse. Western Digital wanted to buy Toshiba's memory business itself for a reduced fee due to the booming demand for NAND flash, which is a critical storage component for most next-generation technologies. Western Digital moved to legally block that deal, saying it violated terms of the joint venture agreement.
To maintain Toshiba Memory's competitiveness, it is considered better for Toshiba to jointly invest with Western Digital.
Toshiba gained the upper hand in negotiations with Western Digital after securing a $5.4 billion cash injection from overseas funds that will allow it to bolster its balance sheet before the end of March and avoid a delisting. The transaction is still subject to regulatory approvals.
As part of the new agreement, Toshiba Memory Corp (TMC) and Western Digital will jointly invest in the new Fab 6 facility in Yokkaichi in order to jointly develop BiCS 3D NAND flash 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.