UPDATE 3-Japan govt-led bid for Toshiba chip unit to include SK Hynix -sources

UPDATE 3-Japan govt-led bid for Toshiba chip unit to include SK Hynix -sources
From Reuters - June 14, 2017

TOKYO/SEOUL A Japanese government-led consortium bidding for Toshiba Corp's chip business will include South Korean chipmaker SK Hynix Inc, sources familiar with the matter saida move likely to add firepower to the group's bid in the hotly contested auction.

The sale has seen much last-minute jockeying by suitors, leaving the conglomerate little time to come to a decision by its shareholders meeting at the end of this month.

Toshiba is seeking a minimum of $18 billion for the world's second-biggest producer of NAND chips and wants to get the deal done as quickly as possible to help it cover billions of dollars in cost overruns at now-bankrupt nuclear unit Westinghouse.

Given the jockeying, Toshiba has given up on choosing a winning bid on Thursday to negotiate the deal, said a person with direct knowledge of the matter. Sources had said the company was aiming for a Thursday decision, though a spokeswoman insisted the deadline for the decision was the second half of June.

A state-backed fund, the Innovation Network Corp of Japan (INCJ), has been at the center of trade ministry efforts to forge a successful bid that will keep the highly prized unit under domestic control. But the nature of its partnerships appears to be going through drastic changes compared to just last week.

Standard & Poor's said on Thursday it remained poised to cut Toshiba's CCC- long-term credit rating "because its plan to sell its memory business has yet to materialize and additional losses or financial burdens might still arise in connection with its U.S. nuclear power business."

"Drawn-out talks over its sale raise the risk of further clouding the timing and amount of the sale if the market or conditions in which the business operates worsen more than the company assumes," S&P said.

INCJ was part of a proposed bid tabled by U.S. chipmaker Western Digital last week that also included U.S. private equity firm KKR & Co LP, sources familiar with the matter have said.

But other sources have also said INCJ is in talks with Bain Capital about bidding for the unit, as the U.S. private equity firm appears willing to put in more money than rivals.

The Asahi newspaper reported on Wednesday that INCJ was now in a consortium that included Bain, KKR, SK Hynix as well as the Development Bank of Japan (DBJ).

Western Digital, which jointly operates Toshiba's main chip plant but is now in a bitter dispute with the conglomerate over whether the auction can proceed without its consent, was not included.

The INCJ bid would also exceed 2 trillion yen ($18 billion), the newspaper said.

A person familiar with the matter told Reuters on Wednesday that SK Hynix would be providing a loan to help finance the bid although it would not be taking a direct stake. Another person briefed on the matter said the Asahi report was correct on the participants in the consortium.


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