Western Digital in bid to block Toshiba chip unit sale

Western Digital is seeking an order from a California court to block the sale of Toshiba’s memory business.

According to Western Digital, there is an arbitration clause in its joint manufacturing venture contract terms and conditions with Toshiba, which gives WD the right to agree or disagree any sale of Toshiba’s joint venture interests.

WD wrote a strongly worded letter in April to the Japanese technology giant requesting exclusive negotiating rights, according to Reuters.

It also wrote in the letter that the transfer of the venture’s rights to a new chip unit was a “very serious breach” and that it would not sit by while Toshiba “runs roughshod” over its rights.

Toshiba has previously denied this and both parties have issued legal threats to each other over the matter.

WD chief executive Steve Milligan stated: “We continue to be actively engaged in discussions with Toshiba’s stakeholders to ensure that they are fully aware of our joint venture rights and of our desire to work with Toshiba to achieve a favourable outcome for all parties. We firmly believe that we provide Toshiba with the optimal solution to address its challenges, and that we are the best partner to advance its legacy of technology innovation in Japan.”

Toshiba has disputed these legal rights.

In preparation for the sale of its memory business sale, the company moved its share of the joint venture into a separate legal entity, Toshiba Memory.

A statement from WD said: “SanDisk [which is owned by WD] and Toshiba agreed to protect their interests in the joint ventures by prohibiting transfers without the consent of the other party. 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.”

The arbitration talks could take 12 to 24 months, meanwhile Toshiba has been reported as saying that it could end the full year with a ¥1.1 trillion loss (£7.13 billion) if it failed to secure cash from selling its memory business.

An executive at one of Toshiba’s main banks said: “The only thing holding Toshiba up at the moment is the sale of the memory chip business. This definitely increases the uncertainty around everything that is happening.”