Proposed deal would give Foxconn 25%, Apple 20% of Toshiba's chip division

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in AAPL Investors
Foxconn is pressing hard for a deal that would give it 25 percent of Toshiba's chip manufacturing business -- an arrangement that would end up with Apple controlling 20 percent of the equity as well.




On Wednesday, Bloomberg reported that Foxconn was swooping in on the chip arm of Toshiba, as other deals started to stall. While no amount was specifically declared, people familiar with the matter claim that the offer is more than the most recent $19 billion deal by a group led by Bain Capital -- that also has Apple in the mix.

Beyond Apple, Foxconn is reportedly supported by SoftBank, Sharp, and long-time chip vendor Kingston Technology. Foxconn spokesman Louis Woo said that his company would hold 25 percent of the equity, Apple 20 percent, Kingston Technology 20 percent, Foxconn-owned Sharp 15 percent, SoftBank 10 percent, with Toshiba retaining 10 percent.

"What this customer consortium means is that it will provide steady funds to Toshiba to advance their R&D," said Woo. "At the same time, it's a guarantee there will be more customers lining up to buy their products when they increase their capacity or have better products."

The deal with China-based Foxconn may run into political problems. The Japanese government and the company itself have been reluctant to sell the division to a company outside of Japan, to avoid the loss of trade secrets to other countries.

Toshiba's memory unit has been up for sale in an attempt to deal with billion of dollars in losses from its bankrupt U.S. nuclear power arm, Westinghouse. The Westinghouse failures in the U.S. are attributed to a declining political appetite for nuclear power, fewer maintenance demands as a result of power plants destined for closure, a shrinking U.S. Navy fleet, and management failures.

Toshiba missed a June 28 deadline that it imposed upon itself to announce a deal for the chip business. Toshiba is still said to be opposed to giving non-Japanese companies any equity or management influence, since the Japanese government is aiming to keep Toshiba's memory unit under local control, and important technology away from foreign firms.

In late June, Toshiba launched a $1.07 billion lawsuit against technology partner Western Digital, trying to keep the chip unit sale on track. It also began blocking access to information in the joint venture, charging that Western Digital staff gained improper access to proprietary data.

While the top bidder as recently as Aug. 30, it appears that Western Digital is no longer in the running for the company, as a deal involving the company was expected to be announced on Aug. 31. It also looks like Bain Capital's deal that also had Apple as a partner has fallen by the wayside at this point.

Toshiba's stock will be delisted in March 2018 if it does not generate funds soon. Continued delays will put the entire company at risk, as it shortens the time available for regulatory approval.

Comments

  • Reply 1 of 14
    I hate to contradict the author, but nuclear power isn't going away. Japan may try to divest itself of nuclear due to Fukushima, but there are no solutions that are more efficient. Their problem was one of preparedness and upkeep.
    mwhitejony0
  • Reply 2 of 14
    gatorguygatorguy Posts: 17,872member
    Yesterday another report was claiming Apple had switched partners on the proposed deal, going all in with Bain Capital and as such was bidding against Foxconn. This article says that Apple is part of both bid groups. A bit confusing but I'll lean in favor of AI's reporting of it.  In any event there's also reportedly a growing chorus saying take Toshiba off the market altogether as it's extremely profitable anyway. 

    As the AI article alludes to a decision on which direction to go in is likely relatively soon considering the stock market situation. 
  • Reply 3 of 14
    Mike WuertheleMike Wuerthele Posts: 1,935administrator
    gatorguy said:
    Yesterday another report was claiming Apple had switched partners on the proposed deal, going all in with Bain Capital and as such was bidding against Foxconn. This article says that Apple is part of both bid groups. A bit confusing but I'll lean in favor of AI's reporting of it.  In any event there's also reportedly a growing chorus saying take Toshiba off the market altogether as it's extremely profitable anyway. 

    As the AI article alludes to a decision on which direction to go in is likely relatively soon considering the stock market situation. 
    It's always been both, since the first offers were made. I am aware other venues have said otherwise.
  • Reply 4 of 14
    Mike WuertheleMike Wuerthele Posts: 1,935administrator
    I hate to contradict the author, but nuclear power isn't going away. Japan may try to divest itself of nuclear due to Fukushima, but there are no solutions that are more efficient. Their problem was one of preparedness and upkeep.
    Preaching to the choir, and no such world-wide allusion was made. It's just Westinghouse that is.

    FTA: "The Westinghouse failures in the U.S. are attributed to a declining political appetite for nuclear power, fewer maintenance demands as a result of power plants destined for closure, a shrinking U.S. Navy fleet, and management failures."
    edited September 2017 SpamSandwich
  • Reply 5 of 14
    gatorguygatorguy Posts: 17,872member
    gatorguy said:
    Yesterday another report was claiming Apple had switched partners on the proposed deal, going all in with Bain Capital and as such was bidding against Foxconn. This article says that Apple is part of both bid groups. A bit confusing but I'll lean in favor of AI's reporting of it.  In any event there's also reportedly a growing chorus saying take Toshiba off the market altogether as it's extremely profitable anyway. 

    As the AI article alludes to a decision on which direction to go in is likely relatively soon considering the stock market situation. 
    It's always been both, since the first offers were made. I am aware other venues have said otherwise.
    As I said originally I tend to go with your reporting of it rather than "other venue". :) AI seems pretty well connected and generally has good research chops.
  • Reply 6 of 14
    Toshiba should simply split off Westinghouse as a separate company. Let Westinghouse fail on its own rather than drag Toshiba down.
  • Reply 7 of 14
    Mike WuertheleMike Wuerthele Posts: 1,935administrator
    Toshiba should simply split off Westinghouse as a separate company. Let Westinghouse fail on its own rather than drag Toshiba down.
    Bit late for that, I'm afraid.
  • Reply 8 of 14
    gatorguygatorguy Posts: 17,872member
    And now Apple is reported to be a Western Digital bid supporter too. They've covered all their bases so if Toshiba sells at all they should get a minority share in it. 
  • Reply 9 of 14
    chyang888chyang888 Posts: 6unconfirmed, member
    To be clear. Foxconn is Taiwan based. Not China based. In fact is Foxconn is gradually lowering its emphasis on China and moving production to the United States. Foxconn's newest Sharp LCD/OLED plant will be in Wisconsin and another automotive related manufacturing plant in Michigan. Should Foxconn take control of Toshiba, it will likely build a flash memory plant in the United States as well. Foxconn has enough reason to do so to supply its customers Apple, Amazon, (and Dell).
    edited September 2017
  • Reply 10 of 14
    chyang888chyang888 Posts: 6unconfirmed, member
    gatorguy said:
    And now Apple is reported to be a Western Digital bid supporter too. They've covered all their bases so if Toshiba sells at all they should get a minority share in it. 
    The latest news is that Apple will no longer to buy memory from Western Digital (who bought Sandisk) if it advances its bid for Toshiba semiconductor. Apple is discouraging Western Digital from its bid. Apple wants to diversify its suppliers to maintain the ability to get good pricing. Apple is however, reported to also back a bid with Bain Capital which is fielding competing offer against Foxconn. Personally, I think it is all a smoke screen. Apple will eventually direct the deal to Foxconn to take control of Toshiba.
    edited September 2017
  • Reply 11 of 14
    chyang888 said:
    To be clear. Foxconn is Taiwan based. Not China based. In fact is Foxconn is gradually lowering its emphasis on China and moving production to the United States. Foxconn's newest Sharp LCD/OLED plant will be in Wisconsin and another automotive related manufacturing plant in Michigan. Should Foxconn take control of Toshiba, it will likely build a flash memory plant in the United States as well. Foxconn has enough reason to do so to supply its customers Apple, Amazon, (and Dell).
    For folks who haven't been to either country, Taiwan and China seem interchangeable. They both "look" like China. I can assure you they are quite different and for the Taiwanese especially, they will let you know this in no uncertain terms.
    edited September 2017
  • Reply 12 of 14
    gatorguygatorguy Posts: 17,872member
    chyang888 said:
    gatorguy said:
    And now Apple is reported to be a Western Digital bid supporter too. They've covered all their bases so if Toshiba sells at all they should get a minority share in it. 
    The latest news is that Apple will no longer to buy memory from Western Digital (who bought Sandisk) if it advances its bid for Toshiba semiconductor. Apple is discouraging Western Digital from its bid. Apple wants to diversify its suppliers to maintain the ability to get good pricing. Apple is however, reported to also back a bid with Bain Capital which is fielding competing offer against Foxconn. Personally, I think it is all a smoke screen. Apple will eventually direct the deal to Foxconn to take control of Toshiba.
    Yes that one's a complicated deal. 

    "Fuse, citing multiple unnamed sources, relates that Apple “is concerned about losing pricing power if Western Digital is running the operation."

    Apple is willing to contribute almost half a billion of its money to the group that includes Western if Western is willing to remain in a minority position in the bid, the sources tell Fuse."

  • Reply 13 of 14
    gatorguy said:
    chyang888 said:
    gatorguy said:
    And now Apple is reported to be a Western Digital bid supporter too. They've covered all their bases so if Toshiba sells at all they should get a minority share in it. 
    The latest news is that Apple will no longer to buy memory from Western Digital (who bought Sandisk) if it advances its bid for Toshiba semiconductor. Apple is discouraging Western Digital from its bid. Apple wants to diversify its suppliers to maintain the ability to get good pricing. Apple is however, reported to also back a bid with Bain Capital which is fielding competing offer against Foxconn. Personally, I think it is all a smoke screen. Apple will eventually direct the deal to Foxconn to take control of Toshiba.
    Yes that one's a complicated deal. 

    "Fuse, citing multiple unnamed sources, relates that Apple “is concerned about losing pricing power if Western Digital is running the operation."

    Apple is willing to contribute almost half a billion of its money to the group that includes Western if Western is willing to remain in a minority position in the bid, the sources tell Fuse."

    Personally, I think it's insane Apple has allowed itself to remain at the mercy of their suppliers for so long. They need to hold controlling stakes in more of them.
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