Foxconn Says Pursuit of Toshiba Deal ‘Not Over’

The head of Taiwan’s tech giant Foxconn said Thursday its pursuit of Toshiba “is not yet over”, a day after the Japanese firm announced it preferred another group of bidders to acquire its prized chip business.

Foxconn, also known as Hon Hai, is controlled by billionaire Terry Gou and reportedly had Apple as a financial backer in its multi-billion dollar bid for Toshiba’s memory chip unit, seen as crucial for the cash-strapped Japanese firm to turn itself around.

Toshiba said Wednesday it would hold exclusive talks with a consortium of US, South Korean and state-backed Japanese investors, dashing Gou’s ambitions.

But the Foxconn chairman vowed to keep pursuing the acquisition, saying the Taiwanese firm still has a chance.

“The Toshiba case is not yet over. It is very similar to the Sharp deal,” Gou told shareholders at an annual meeting in New Taipei City.

He was referring to his takeover last year of the Japanese electronics firm for $3.7 billion, a move he described as “really worth it.”

Foxconn Says Pursuit of Toshiba Deal 'Not Over'Gou is known for his aggressive dealmaking prowess, shown by his dogged determination to acquire Sharp despite concerns over the Japanese firm’s mounting losses.

“We still have a big chance,” he said at Thursday’s meeting of the Toshiba quest, adding there were still “a lot of variables”.

The inclusion of Japanese investors in the selected bidding group by Toshiba will ease reported government concerns about losing a sensitive technology to foreign owners.

But a Foxconn official criticized Japanese authorities for taking a protectionist approach.

“There’s no end to their corporate crisis if they are not able to open up,” said Tai Jeng-wu, who took over as president of Sharp after Foxconn’s buyout.

The Taiwanese firm is the world’s largest contract electronics maker and is best-known for assembling products for international brands such as Apple and Sony.

Gou said earlier this year he was mulling a $7 billion investment to make flat panels in the United States in a joint project with Japan’s Softbank.

He also said Foxconn aimed to increase investment in China this year to try to boost Sharp’s market share in the country.

Toshiba Tells Western Digital Not to Interfere With Chip Unit Sale

Toshiba has told Western Digital not to interfere with the sale of its prized chip unit, disputing claims by the US firm that it had breached a joint venture contract.

Western Digital, which is a partner in Toshiba’s main semiconductor plant as well as one of the bidders for the chip business, has argued that the Japanese firm is violating their contract by transferring their joint venture’s rights to the newly formed unit.

In a May 3 letter sent by Toshiba’s lawyers, the Japanese conglomerate disputed Western Digital’s argument and said it would pursue all available remedies if it saw continued interference in the sale process.

Toshiba Tells Western Digital Not to Interfere With Chip Unit SaleWestern Digital’s “campaign constitutes intentional interference with Toshiba’s prospective economic advantage and current contracts. It is improper, and it must stop,” the letter, which was seen by Reuters, said.

In a separate letter, also dated May 3, the general manager of Toshiba’s legal affairs accused Western Digital of failing to sign some joint venture agreements.

If Western Digital refuses to sign by May 15, the chip unit would protect its intellectual property rights by suspending Western Digital employees’ access to all of the unit’s facilities, networks and databases, the letter said.

A Western Digital spokeswoman in Japan declined to make immediate comment.

Japan Urges Toshiba, Western Digital to Get Along as Chip Spat Flares

Japan’s government said on Tuesday it wanted Toshiba and partner Western Digital to cooperate, expressing concern about an escalating dispute between the two that threatens to upend the sale of Toshiba’s chip unit.

Western Digital sought international arbitration this week to stop Toshiba from selling the unit without its consent, arguing that the Japanese conglomerate has violated contracts relating to their joint venture that operates Toshiba’s main semiconductor plant.

The California-based firm is one of the bidders for the world’s second biggest NAND chip producer, but is not among the frontrunners after submitting a much lower offer than other suitors, a source with knowledge of the matter has said.

“It’s very important for Toshiba and Western Digital to cooperate, Trade Minister Hiroshige Seko told reporters at a regular briefing on Tuesday, although he added that the ministry did not intend to intervene in the dispute.

His comments come after media reports that one of the proposed deals under discussion among government circles is to have chip unit – which is valued by Toshiba at at least $18 billion – brought under control of the state-backed Innovation Corporation of Japan (INCJ) fund.

INCJ and U.S. private equity firm KKR & Co LP are widely expected to be the main players in a consortium which will take part in a second round of bidding.

However, some INCJ officials are cautious about making a large-scale deal, sources familiar with the matter said, declining to be identified as they were not authorised to speak publicly about the matter. The fund has just 1 trillion yen ($8.8 billion) in its war chest for acquisitions and investment.

The Financial Times reported on Tuesday that some senior members in Prime Minister Shinzo Abe’s administration have privately discussed offering up to $8 billion in government loan guarantees to support a INCJ-KKR bid.

Japan Urges Toshiba, Western Digital to Get Along as Chip Spat FlaresJapan government spokesman Yoshihide Suga said, however, that there was no truth to the report. A spokeswoman for INCJ declined to comment.

Shares in Toshiba, which is depending on the sale of the chip unit to cover billions in dollars in cost overruns at its now bankrupt US nuclear unit Westinghouse, slid to end down 12 percent. The cost of insuring against default for Toshiba’s five-year yen debt also spiked 10 basis points higher.

“While we believe that the successful sale of its chip business is indispensable for Toshiba to remain a going concern, hurdles to realising such a goal are increasing,” said Masako Kuwahara, a senior analyst at Moody’s Investors Service.

Toshiba said it had not yet decided whether to proceed with a threat to block Western Digital employees from the plant as well as databases if the US company did not sign a broad collaboration agreement that the two had negotiated. CEO Satoshi Tsunakawa said on Monday that he would make a decision on the matter on Tuesday.

Other suitors for the chip unit include Taiwan’s Foxconn and US chipmaker Broadcom but are also seen as less attractive options. Foxconn may face opposition due to its deep ties to China as the government has said it will block any deal that risks key technology leaving Japan, while Western Digital has said it is vehemently opposed to Broadcom.