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The Toshiba Deal with Bain Capital may have to be restructured to get Apple and SK Hynix to Sign on



Last Thursday Patently Apple posted a report titled "Official Announcement and more Details on the Sale of Toshiba Memory Corp to Pangea formed by Bain." Our report covered two PDFs from Toshiba. The first first was titled 'Notice on the sales of Toshiba Memory Corporation' while the other was titled 'Notice on the Extraordinary General Meeting of Shareholders." What came out of that board meeting angered SK Hynix and now Toshiba is telling the banks that their chip deal may be delayed because Apple has yet to approve their end.


SK Hynix


Late on Friday a Korean report hit the wire that while the deal for Toshiba was approved, it's really now that the negotiations actually begin. What's emerging from Toshiba's board concerns SK Hynix.


The business report stated that "Japanese companies including Toshiba will secure more than 50% of the voting rights," the Nihon Keizai Shimbun Newspaper of Japan said on September 21. 'Four US IT companies including Apple will receive preferred shares without voting rights."


The Japanese media report further noted that "SK Hynix's investment is a simple loan, will not translate into convertible bonds (CBs).' Convertible bonds can be converted into stocks after a certain period of time, but a loan only receives interest and does not guarantee equities.


Toshiba also said the company will give the Innovation Network Corporation of Japan (INCJ) and the Development Bank of Japan the right to supervise Toshiba.


'We have a long way to go,' SK Hynix said with respect to Toshiba's announcement of strict and tough sell-out conditions. In other words, it is an internal judgment by SK Hynix that accepting these conditions will not benefit SK Hynix much for investing over three trillion won. 'From now on, we will negotiate with Toshiba in earnest and make details of the conditions as advantageous to us as possible,' a senior SK group official said. 'Not all investment funds will be given as loans as reported by the Japanese media. Unless the deal benefits SK Hynix, the deal may be opposed by SK Hynix's board of directors. '




According to a new Reuters report, Toshiba Corp has "told its main banks on Monday it has not signed the $18 billion sale of its semiconductor business because Apple Inc, a member of the buyer group, has not agreed on key terms, two people involved in the deal said. Details of the issues with Apple couldn't immediately be ascertained.


Apple, which is considering investing in the unit through preferred shares, has not submitted the necessary commitment letter, said the people, who asked not to be identified as the talks were private.


It could be a simple legal paperwork hiccup on Apple's part or something much more substantial. Considering that SK Hynix is so angy over how they're being treated, the deal may have to be restructured with Toshiba not getting all of the voting power that they're taking for granted. Toshiba's memory business was on the verge of collapse and yet they're structuring the deal so that they get to retain "more than 50% voting rights"?


And lastly, although it was highly expected, the korean report further noted that Western Digital filed an additional lawsuit opposing the expansion of Toshiba's memory plants apart from a lawsuit against the sell-off of Toshiba Memory filed in US and Japanese courts on September 20 (local time) just after the Toshiba board's decision.


This is turning out to be somewhat of soap opera. Stay tuned, more news on this deal is likely to emerge.


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