* Western Digital: won't let Toshiba run roughshod over its
* Says some other rumoured bidders are highly problematic
* Toshiba has narrowed field of suitors to four - sources
* Broadcom offered highest bid of $23 bln -source
* Western Digital bid far below Broadcom, Foxconn offers
(Writes through with size of bids offered for chip unit)
By Makiko Yamazaki and Taro Fuse
TOKYO, April 12 Western Digital Corp has
warned Toshiba Corp that the Japanese firm is violating
a joint venture contract in plans to sell to its chip unit and
urged that it be given exclusive negotiating rights.
In a strongly worded letter dated April 9, Western Digital,
which operates a semiconductor plant with Toshiba in Japan, said
the transfer of the venture's rights to a new chip unit which
was split off recently without the U.S. firm's consent was a
"very serious breach".
The letter, seen by Reuters, also said the U.S. firm would
not sit idly by while Toshiba "runs roughshod" over its rights,
although it did not threaten legal action.
The move, seen as a play by the California-based company to
strengthen its hand in talks, is set to complicate the auction
of the prized unit - a sale essential to Toshiba's plans to
cover writedowns at U.S. nuclear unit Westinghouse that have
plunged it into crisis.
"The only thing holding Toshiba up at the moment is the sale
of the memory chip business. This definitely increases the
uncertainty around everything that is happening," said an
executive at one of Toshiba's main banks.
Sources at Toshiba's banks said they had been told by the
Japanese conglomerate that there were no legal problems with its
decision to split off the chip business.
The auction has drawn strong interest, and Toshiba has
narrowed down the field to just four suitors to move on to a
second round of bidding, people briefed on matter said.
U.S. chipmaker Broadcom Ltd has put in the highest
first-round offer of 2.5 trillion yen ($23 billion) while
Taiwan's Foxconn, the world's largest electronics
contract manufacturer, offered 2 trillion yen, one of the people
Western Digital' s bid was far below both those offers, the
Broadcom has partnered with U.S. private equity firm Silver
Lake Partners LP, the sources added. The size of the offer made
by South Korean chipmaker SK Hynix, the fourth
suitor, was not immediately known.
The sources declined to be identified as they were not
authorised to speak on the matter publicly.
Toshiba declined to comment on the content of the contract
with Western Digital and the auction process. Representatives
for Broadcom, Silver Lake, Western Digital, Foxconn could not be
reached immediately for comment outside of regular business
ATTACK ON BROADCOM
In the letter sent by CEO Stephen Milligan and addressed to
Toshiba's board of directors, Western Digital said rumoured bids
of between 2 trillion yen to 3 trillion yen were well above the
fair value of the business and cited analysts' estimates of
around 1.5 trillion yen.
It added that it had invested more than $13 billion in their
joint venture over the last 17 years and had repeatedly tried
address its concerns with Toshiba but had not received
It said it was urging Toshiba "to cease acting as if Western
Digital were simply a disfavoured bidder in an open auction and
instead enter into substantive, exclusive negotiations."
Western Digital also said that other rumoured bidders are
highly problematic for both Japan and the joint venture and
specifically named Broadcom, saying that it had grave concerns
based on recent commercial dealings with the firm.
The U.S. chipmakers are seen as more favoured bidders as the
Japanese government has vowed to vet bidders and block a sale to
investors it deems a risk to national security.
In particular Foxconn, formally known as Hon Hai Precision
Industry Co Ltd, is considered such a risk because of its deep
ties with China, sources have previously said.
The news of the letter comes one day after Toshiba filed
twice-delayed business results without an endorsement from its
auditor and warned its very survival was in doubt.
Toshiba has said it expects to book an annual net loss of 1
trillion yen ($9 billion) for this business year on a writedowns
($1 = 109.6600 yen)
(Reporting by Makiko Yamazaki and Taro Fuse; Additional
reporting by Tim Kelly in Tokyo and Liana B. Baker in San
Francisco; Editing by Edwina Gibbs)