Toshiba, Western Digital settle legal dispute, announce new partnership

Embattled Japanese electronics giant Toshiba Corporation and its joint venture partner Western Digital have ended years of legal wrangling over the former's plans to sell its flash memory chip unit to raise cash and instead decided to renew their collaboration.

Accordingly, Toshiba Corporation, Toshiba Memory Corporation and Western Digital Corporation have entered into a global agreement to settle their ongoing disputes in litigation and arbitration. The parties also decided to strengthen and extend their relationship, and enhance their flash memory collaboration.

As part of this agreement, TMC and Western Digital will participate jointly in future rounds of investment, including in the state-of-the-art memory fabrication facility now under construction at Yokkaichi, slated for 6 February 2018.

Toshiba had, in October, announced fresh investment in a new facility entirely devoted to the mass production of BiCS FLASH, the next-generation of 3D flash memory, starting next year.

TMC and Western Digital similarly intend to enter into definitive agreements under which Western Digital will participate in the new flash wafer fabrication facility, which will be constructed in Iwate, Japan.

The parties will strengthen their flash memory collaboration by extending the terms of their joint ventures - Flash Alliance will be extended to 31 December 2029 and Flash Forward to 31 December 2027. Flash Partners was previously extended to 31 December 2029.

The parties' agreement to resolve all outstanding disputes ensures that all parties are aligned on Toshiba's sale of TMC to KK Pangea, a special purpose acquisition company formed and controlled by a consortium led by Bain Capital Private Equity, LP.

The parties have agreed on mutual protections for their assets and confidential information in connection with the sale of TMC, and on collaborating to ensure the future success of TMC as a public company following an eventual IPO.

''With the concerns about litigation and arbitration removed, we look forward to renewing our collaboration with Western Digital, and accelerating TMC's growth to meet growing global demand for flash memory. Toshiba also remains on track to complete our transaction with the consortium led by Bain Capital by the end of March 2018,'' Yasuo Naruke, senior executive vice president of Toshiba Corporation and president and CEO of TMC, said.

''This will ensure that TMC has the resources it needs to continue to innovate and deliver for a fast-growing flash memory market, particularly in areas driven forward by advances in AI and IoT,'' he added.

''Western Digital's core priorities have always been to protect the JVs and ensure their success and longevity, guarantee long-term access to NAND supply, protect our interests in the JVs, and create long-term value for our stakeholders. We are very pleased that these agreements accomplish these critical goals, allow Toshiba to achieve its objectives, and also enable us to continue delivering on the power of our platform,'' Western Digital chief executive Steve Milligan stated.

''Bain Capital is pleased that Toshiba and Western Digital have resolved all outstanding legal disputes. The settlement represents the best possible outcome for all parties, clearing the way for the Bain Capital-led consortium to complete its acquisition of TMC as planned. We look forward to supporting TMC to achieve its strategic objectives while enhancing these important JVs with Western Digital,'' added Yuji Sugimoto, managing director and Japan head of Bain Capital.

As part of the global settlement agreement, Toshiba, TMC and Western Digital have agreed to withdraw all pending litigation and arbitration actions.

Toshiba has said it hopes the sale, estimated at ¥2 trillion ($18 billion), will close by the end of March. It may have to clear further hurdles, such as possible anti-trust concerns.

Toshiba has been hit by huge losses related to its US nuclear operations at Westinghouse Electric Co, which filed for bankruptcy earlier this year. The company also faced criticism over bookkeeping and corporate governance issues.

Toshiba said it expects to return to the black by the end of this fiscal year, in March.

In the meantime, it has struggled to avoid being delisted. Last week it raised 600 billion yen ($5.3 billion) by issuing new shares with 60 overseas investment funds.

Besides Bain Capital Private Equity, the consortium which now owns Toshiba Memory Corporation includes the government-backed Development Bank of Japan and the Innovation Network Corp of Japan, which is made up of 26 big-name Japanese corporate investors, including Sony Corp, Canon Inc, Toyota Motor Corp and Sumitomo Mitsui Banking Corp. The consortium also includes South Korea's SK Hynix.