TOKYO (Reuters) – Western Digital Corp (WDC.O) said on Tuesday it will seek an injunction to block the sale of Toshiba Corp’s (6502.T) prized semiconductor business to a rival group, upping the ante in an acrimonious battle with its chip venture partner.
The latest legal action by the U.S. firm, which jointly invests in Toshiba’s main chip plant, comes in the wake of the Japanese conglomerate’s decision last week to sell the semiconductor unit to a consortium led by Bain Capital LP.
The $18 billion agreement with the Bain group is, however, still unsigned, with Toshiba telling its main banks this week that Apple Inc (AAPL.O), a member of the consortium and an important client, had yet to agree to key terms.
Western Digital’s injunction is being sought with the International Court of Arbitration, where the California-based company, which argues no deal can be done without its consent, initiated proceedings against its partner earlier this year.
A panel of three arbitrators may be formed as early as this week and a decision on the injunction could come late this year, which would be before any deal is finalised, a source familiar with the matter said, declining to be identified due to the sensitivity of the mattter. A final ruling on the dispute is not expected before 2019.
The highly contentious auction process underscores how high the stakes are as rival suitors, the Japanese government and Toshiba’s creditor banks all squabble over the world’s second biggest producer of NAND memory chips.
For Toshiba, a signed deal would come not a moment too soon as it needs to raise billions of dollars to cover liabilities arising from its now bankrupt U.S. nuclear unit Westinghouse before the end of the financial year in March. If it fails to do that, it could be delisted.
Even if Toshiba manages to sign the deal with the Bain group imminently, it is still cutting it fine as regulatory reviews often take six months.
For its part, Western Digital, one of world’s leading makers of hard disk drives, paid some $16 billion last year to acquire SanDisk, Toshiba’s chip joint venture partner since 2000 and sees chips as a key pillar of growth.
At some points during the nine-month auction process, the consortium backed by Western Digital and which also includes KKR & Co (KKR.N) had looked liked it was the front-runner to win. But the U.S. firm, whose relationship with Toshiba has rapidly deteriorated, would not agree to limits to any future stake in the chip business that Toshiba had demanded, sources have said.
Just last week, Western Digital filed a fresh arbitration request seeking to stop Toshiba from investing in a new chip facility in Yokkaichi, Japan, unless SanDisk was also allowed to invest.
Toshiba said in August it decided to invest in the new line without Western Digital as they “failed to reach agreement” on joint investment.
Western Digital previously sought an injunction from a California state court to block any sale of the chip unit without its consent. The court ordered Toshiba in July to give Western Digital two weeks’ notice before any deal is closed.
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