Western Digital and Toshiba settled their NAND dispute with an out-of-court settlement that allows Toshiba’s sale of its NAND chip business while WD keeps its stake in the companies’ joint venture.
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Western Digital Tuesday agreed to drop pending court arbitration and litigation through the courts, and allow Toshiba’s proposed $17.7 billion sale of its chip unit to a consortium led by Bain Capital. Western Digital moved to legally block that deal, saying it violated terms of the joint venture agreement. WD came into the joint venture through its acquisition of SanDisk, Toshiba’s original partner in the 17-year joint venture.
The Western Digital-Toshiba dispute began early this year when Japanese-based Toshiba said it would sell its memory business to stave off bankruptcy. Western Digital claimed any sale of the chip business required its consent, but Toshiba rebuked WD’s attempt to buy the business. Instead, it reached agreement with the Bain group that excluded Western Digital.
The Western Digital-Toshiba settlement extends the companies’ NAND joint venture investments to Dec. 31, 2027 and beyond. Western Digital can participate in all future JV investments, including a new wafer fab facility in Japan. The joint agreements had been scheduled to begin expiring in 2021.
The deal allows Toshiba to sell Toshiba Memory Corp. (TMC) to the Bain group that includes Western Digital competitors Seagate, Kingston Technologies and SK Hynix, along with its customers Dell and Apple.
The Western Digital-Toshiba agreement also allows the consortium to eventually take TMC into the public markets.
Western Digital CEO Steve Milligan said his company never wanted to go through the courts to settle the dispute.
“As the process moved down the litigation path, that was not our preferred path,” Milligan said on a Tuesday night conference call. “We’re very pleased to be able to resolve this and put it behind us.”
Milligan called the agreement “a win-win for all parties” because it allows the TMC deal to go through while guaranteeing Western Digital access to NAND supply for at least a decade.
Milligan said the Western Digital-Toshiba joint venture is necessary for his company to manufacture NAND flash, a key asset as flash becomes a large part of enterprise and consumer storage. “We have no plans to manufacture NAND flash, nor do we have the ability to manufacture outside of the joint agreement,” he said.
Western Digital executives said WD will have access to intellectual property from the JV, but members of the Bain consortium will not share that IP.
Neither Toshiba nor Bain took part in the conference call with Western Digital executives, but both released statements confirming the agreement. Yasuo Naruke, senior executive vice president of Toshiba Corp. and CEO of TMC, said he expects the Bain deal to close by the end of March 2018.
“With the concerns about litigation and arbitration removed, we look forward to renewing our collaboration with Western Digital, and accelerating TMC’s growth to meet growing global demand for flash memory,” Naruke said.