Toshiba signed the deal. Western Digital opposed the deal. Now the two companies are putting behind them months of bitterness over Toshiba’s decision to sell its flash memory unit, and Western Digital’s decision to file an injunction that could have imperiled the $18 billion deal.
Toshiba and Western Digital said Wednesday that they agreed to withdraw all the lawsuits and arbitration cases that they had fired at each other over the sale of Toshiba’s unit to an investor group led by Bain Capital. The settlement cements Western Digital’s supply of chips from the manufacturing operations it shares with Toshiba, which is exactly what it wanted.
Toshiba, on the other hand, can move ahead with its sale to Bain Capital’s coterie. “With the concerns about litigation and arbitration removed, we look forward to renewing our collaboration with Western Digital,” said Yasuo Naruke, senior executive vice president and chief executive of Toshiba’s memory business unit, in a statement.
“Toshiba also remains on track to complete our transaction with the consortium led by Bain Capital,” he added. Toshiba needed the sale to patch massive losses from its nuclear power subsidiary, Westinghouse, which burned through cash during several construction projects in the U.S.
Toshiba signed the deal in September after months of contentious bidding over the memory chip business, the crown jewel of Toshiba’s electronics empire. Toshiba agreed to sell more than half of it to a holding company owned by Bain Capital’s investors, including Apple and South Korea’s SK Hynix. None of the American investors will have voting rights.
The outcome irritated Western Digital. The American data storage company shares ownership of Toshiba’s flash memory operations in Japan and asserted that Toshiba violated the terms of their contract. Western Digital argued that Toshiba needed its approval, and in September, it said that it intended to file an injunction to block the sale.
It could have taken two years for the international court of arbitration to pass down a final ruling, complicating Toshiba’s plan to close the transaction by March, which is already ambitious because it still needs to pass antitrust regulators. Western Digital also bid for Toshiba Memory Corporation, which seemed amenable to the deal before a last minute reversal.
Toshiba was irked by Western Digital’s legal action. In October, the company said that it would invest in its newest fab in the Japanese city of Yokkaichi without its American counterpart. That would essentially cut off Western Digital from its supply of 3D NAND chips, which are used in almost everything from smartphones to data storage systems in servers.
Toshiba had already ruffled Western Digital’s feathers in August, when it announced that it would be invest 195 million yen into chip fabrication equipment for the plant, Fab 6. The factory is expected to start production of Toshiba’s BiCS flash next year. It will be capable of precisely stacking 96 layers of transistors to improve memory density.
The settlement puts an end to these hostilities. Toshiba Memory Corporation and Western Digital said that they would both partake in future rounds of investment in Fab 6. The company also vowed to collaborate on a new wafer fabrication facility in the city of Iwate, which will provide additional supply to tackle the flash memory shortage.
Western Digital’s chief executive, Steve Milligan, said in a statement that its “core priorities” were always to protect its joint venture operations with Toshiba and to “ensure their success and longevity.” The companies also agreed, as part of the peace treaty, to extend their joint ventures in Japan through 2029.