The (faux) bidding war for Toshiba Corp.'s chip unit may be over, but what all parties need to hope for now is an end to the legal battle.
In its statement Wednesday announcing Bain Capital Private Equity LP as the victor, Toshiba gave a nod to Western Digital Corp.'s litigious belligerence, saying that the sale will proceed even if Western Digital is eventually granted an injunction. In the meantime, Toshiba will continue discussions with SanDisk, which is now owned by Western Digital and is the source of their dispute.
Bain managed to get the go-ahead for its proposal in part by recruiting Apple Inc. and Dell Inc. to join, and even having the gumption to ask Apple for an extra $4 billion in cash, according to Bloomberg News. The consortium members weren't named in Wednesday's statement to the Tokyo Stock Exchange.
Assuming this really is the end of the saga (a big assumption, to be sure) then Toshiba should be in the clear to plug the financial hole left by its nuclear power unit and get back to business, sans semiconductors.
It's an absolute failure of Toshiba's board to not wrest more money from Bain. As I wrote previously, the Japanese company had the makings of a bidding war and it had a duty to leverage that. A final price of 2 trillion yen ($18 billion), versus earlier bids of around 2.1 trillion yen, is testament to their incompetence.
But an even bigger failure will be not securing some sort of insurance against a prolonged legal fight with Western Digital based on the U.S. hard-disk-drive maker's claims to priority rights due to the joint venture it has with Toshiba. Bain seems to be offering some kind of assurance by promising to go through with the marriage even if Western Digital keeps agitating.
The fact that Western Digital looks to have dropped out of the race altogether indicates that either it's giving up or is keeping some legal powder dry for a more focused end-game. I suspect the latter; the narrative so far has been that Western Digital was willing to reduce its role in order to allay antitrust concerns.
Now Apple and Dell could have a hand in encouraging Western Digital to find a non-litigious solution. This may involve access to guaranteed chip supply, intellectual property or technology development.
But assurance from Bain doesn't equal insurance against Western Digital. Toshiba's board seems utterly incapable of learning any lessons, but you'd hope the company's nuclear disaster taught it the danger of making open-ended deals for the sake of expedience.
As the final touches are made to its chip unit sale, Toshiba needs to ensure the loose end that is Western Digital is wrapped up. After years of costly mistakes, that's the least it can do.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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