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Technology Stocks : WDC, NAND, NVM, enterprise storage systems, etc. -- Ignore unavailable to you. Want to Upgrade?

To: Unwelcomeguest who wrote (3773)

5/20/2018 11:24:42 PM

From: Sam

Read Replies (1) | Respond to of 4828

I don't know, UWG, this deal is really complicated. Here is an excerpt from another article on it (dated March 29 of this year):

The deal’s prospects beyond the May deadline become more murky. The issuance of new shares in December brought in new shareholders that could take a more active role in the electronics maker’s affairs. A total of about 60 funds, including David Einhorn’s Greenlight Capital, Daniel Loeb’s Third Point and Effissimo Capital Management Pte, hold about a third of Toshiba. A general shareholders meeting scheduled for late June could give them an opportunity to agitate for a better deal.

“These new shareholders bought in with expectations of growth,” Yasuda said. “They are the ones that are likely to think that Toshiba is better off with the chips as part of the group.”

bloomberg.com

Are they really going to give discounts to STX, Hynix, Kingston et al? What will that do to their profitability? It is absurd. The 60 funds that hold a third of Toshiba won't be happy about it, nor will Bain, I would imagine. Bain wants to relist the company in three years:

Bain preparing to relist Toshiba on Stock Exchange in three years
pcr-online.biz

And here is a reference from Reuters to "Japanese firms" maintaining a majority interest in the company:

The deal will see Toshiba reinvest in the unit and together with Hoya Corp ( 7741.T), a maker of parts for chip devices, Japanese firms will hold more than 50 percent of the business - a keen wish of the Japanese government.

reuters.com

So, if these hedge funds own about a third of the company and Japanese companies own more than 50% of the business, how much does that leave for Bain, STX, Hynix and Kingston? Not much--17% or so. It appears to me that they are getting ripped off. Especially since both Hynix and Seagate have some pretty heavy restrictions put on their ownership:

Bain put partnership restrictions on Seagate and SK Hynix

Friday, October 27, 2017

Seagate Technology PLC (STX.O), a member of the group taking over Toshiba Corp’s (6502.T) chip unit, pledged not to buy any stake in the unit for 10 years as part of the $18 billion deal, showed a document from group leader Bain Capital LP reviewed by Reuters.

The pledge was made as Toshiba’s chip joint venture partner Western Digital Corp (WDC.O) objected to the unit’s sale to rivals. Seagate directly competes with Western Digital in hard disk drives.

Western Digital still opposes any deal without its consent and has sought an injunction at the International Court of Arbitration.

Seagate has “signed to a 10-year stand-still agreement barring them from purchasing any voting equity interest” in the unit “or having any governance rights,” showed the document Bain prepared for analysts.

Bain confirmed the contents of the document to Reuters.

Toshiba did not provide immediate comment. Reuters could not reach Seagate for comment.

Western Digital has also protested against the participation of another competitor, South Korean chipmaker SK Hynix Inc (000660.KS), the world’s fifth-biggest NAND memory chip maker.

Toshiba has said SK Hynix will for 10 years be prevented from accessing proprietary information belonging to the chip unit and owning more than 15 percent of voting rights.

Bain, in its document, said the U.S. private equity firm “will control the board and governance of the company.”

Seagate has committed up to $1.25 billion to finance the purchase of the chip unit - the world’s second-biggest producer of NAND flash memory semiconductors - and expects to enter into a long-term supply agreement.

“This agreement has the opportunity to increase the potential for meaningful future revenue growth from Seagate’s NAND storage portfolio,” Seagate Chief Executive Officer Dave Mosley said in an earnings call this week.

simmtester.com

Who knows what the NAND business will be like in 10 years? Or even five years, for that matter?

This whole thing seems a little crazy to me. It would be good to get some words of wisdom from Dan after the sale goes through.