Toshiba poised to give up $18bn memory chip unit sale

Toshiba and Bain increasingly pessimistic that Chinese regulators will approve deal

Toshiba is increasingly likely to abandon the sale of its memory chip business to a consortium led by private equity firm Bain Company, following a series of regulatory hurdles preventing a quick sale and a $5.4bn fund-raiser in November last year.

According to the Wall Street Journal, the company's management team has pretty much given up on the prospect of selling the business due to a protracted regulatory approval process in China.

Last September, the company came to an agreement with Bain to sell its chip business, which specialises in NAND flash storage, for $18 billion. The deal would have retained a 40 per cent stake for Toshiba and, while bringing on-board Bain and rival Hynix, Japanese companies would have retained nominal 50 per cent-plus control.

However, they have yet to close the deal because Chinese antitrust regulators are still going over the plans and won't be finished before the end of the month. Toshiba is pessimistic that they will approve the deal in a form acceptable to all parties.

As the world's second-biggest economy and biggest exporting nation, China is an important market for Toshiba's chip business.

However, there has reportedly been a lack of communication between Chinese regulators and Toshiba officials.

In October, Yuji Sugimoto - who heads-up Bain Capital in Japan - told Reuters that the company would attempt to list the business within three years of completing a deal. That would enable Bain to exit from the company, taking a healthy profit in the process.

At the time, Sugimoto expected that the deal would be completed by the end of March 2018, enabling Toshiba to retain its Tokyo Stock Exchange listing following financial difficulties. But the deal has been held up by repeated investigations in China.

"We have already made (antitrust) filings for regulatory approvals globally. We are making utmost efforts to close the deal by the end of March," said Sugimoto at the time.

It is believed that the bubbling trade war between China and the US, where Bain and many other members of the investor consortium are based, is behind the regulatory hiatus.

Despite the concern in both the Toshiba and Bain camp, there are thought to be some people involved in the deal who say it could still go ahead this year.

According to China's trade rules, regulators have a review period that will last until the end of May. So, they could still give the thumbs up to the deal.

"The deal is going nowhere, and the current scheme is dead," said a person directly involved in Toshiba's effort," one source told the Wall Street Journal.