Western Digital is planning to take its NAND flash chip partner Toshiba to international arbitration in a bid to prevent it from selling its 50 per cent stake in the two company's semiconductor unit to the highest bidder.
The move comes after Toshiba sent formal legal warnings to Western Digital, urging it to back off, just weeks after Western Digital threatened to take action to block the sale by Toshiba. Western Digital, in turn, claims that Toshiba's legal transfer of its joint-venture interests to a subsidiary, Toshiba Memory, as part of the sale process violates the "anti-transfer provisions of the joint venture agreements", as it was done without the consent of Western Digital-owned SanDisk.
The Japanese company put its prize asset on the block after its US nuclear power business, Westinghouse, was put into Chapter 11 bankruptcy protection following a series of disastrous business decisions. Toshiba is planning to sell its 50 per cent stake in the semiconductor unit in a bid to plug a hole in the company's accounts, and to enable it to take Westinghouse out of bankruptcy protection.
Western Digital only acquired its 50 per cent stake in the business as a result of its $19bn acquisition of SSD maker SanDisk in May 2016. Toshiba claims that not only did it not raise any objections over that transfer of ownership, but that Western Digital never formerly updated the joint venture agreement between the two companies following the transfer. Toshiba claims that it is well within its rights to sell its 50 per cent stake to whoever it likes.
As many as ten companies and consortia have lined up to register an interest in bidding for the stake, including Western Digital. However, the Irvine, California-based company is likely to be financially outgunned as it is already highly leveraged as a result of the SanDisk acquisition.
But Western Digital has not been put off by Toshiba's legal warnings earlier this month. Instead, Western Digital has begun arbitration proceedings with the International Chamber of Commerce with the aim of halting the sale of the assets without Western Digital's consent.
"The arbitration demand seeks among other things an order requiring Toshiba to unwind the transfer to Toshiba Memory, and injunctive relief preventing Toshiba from further breaching the Flash JV agreements by transferring its Flash JV interests, or any interest in an affiliate that holds its Flash JV interests, without SanDisk's consent," claimed Western Digital in a statement.
Western Digital CEO Steve Milligan added that a transfer of ownership without the consent of the joint-venture partner was explicitly prohibited by the terms of the agreement.
"In order to protect against being forced into such a relationship with parties not of their choosing, SanDisk and Toshiba agreed to protect their interests in the joint ventures by prohibiting transfers without the consent of the other party," said Milligan in the statement.
He continued: "Toshiba's attempt to spin out its joint venture interests into an affiliate and then sell that affiliate is explicitly prohibited without SanDisk's consent. Seeking relief through mandatory arbitration was not our first choice in trying to resolve this matter. However, all of our other efforts to achieve a resolution to date have been unsuccessful, and so we believe legal action is now a necessary next step."
Computing's Big Data and IoT Summit 2017 and the Big Data and IoT Summit Awards are coming on 17 May 2017.
Find out what construction giant Amey, Lloyds Banking Group, Financial Times and other big names are doing in big data and the Internet of Things.
Attendance to the Summit is free to qualifying senior IT professionals and IT leaders, but places are strictly limited, so apply now.
AND on the same day, Computing is also proud to present the Big Data and IoT Summit Awards, too. See the finalists - and secure a table for your team at the Awards - now
National Data Guardian Dame Fiona Caldicott warns that transfer of medical records was 'inappropriate'
The GDPR could be a "privacy earthquake" - but what will its impact be on storage of personal data?
The Lazarus Group, resposible for the Sony pictures hack of 2014, suspected of perpetrating WannaCry hack
Western Digital ignores Toshiba's legal warnings not to try and stop chip unit sale