BEIJING - Terry Gou, the billionaire behind Apple’s iPhone factories,
is pressing his case to acquire Toshiba’s memory chips business for 2.1
trillion yen ($19.5 billion) in a last-ditch effort to beat out two American
buyout firms in the tumultuous auction.
Gou’s Foxconn Technology Group has broad support for its
offer from Apple, SoftBank Group and Sharp and is ready to proceed right away,
said Louis Woo, a spokesman for the company, whose primary listed arm is Hon
Hai Precision Industry.
The price tag compares with a rival bid led by Bain Capital
said to be worth around 2.1 trillion yen and one from a KKR & Co.-led group
said to be about 2 trillion yen.
“The bid speaks for itself. It is deal certainty,” said Woo.
“What this customer consortium means is that it will provide steady funds to
Toshiba to advance their R&D. At the same time, it’s a guarantee there will
be more customers lining up to buy their products when they increase their
capacity or have better products.”
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Toshiba declined to comment. The industrial and electronics
manufacturer is still negotiating with three groups in the auction of its
most valuable business, after failing to secure a final deal with the preferred
bidder it selected in June.
The effort has been hampered by political opposition and
litigation from partner Western Digital Corp. Japanese government officials
have opposed selling the chips unit to Foxconn because of its close ties to
China, home to much of the Taiwanese company’s sprawling manufacturing
operation.
Foxconn to Western Digital, How D’Ya Like Them Apples? Gadfly. Gou won control of Osaka-based Sharp after protracted
negotiations in which politics also played a key role.
Woo detailed the proposed ownership of Toshiba to make the
case it is not a Chinese or even Taiwanese bid. Foxconn would hold 25 percent
of the equity, Apple 20 percent, Kingston Technology 20 percent, Sharp 15
percent, SoftBank 10 percent and Toshiba would keep 10 percent, he said.
"We just hope the board directors of Toshiba will make
a decision on commercial terms, on business terms, on technology terms, rather
than political terms," Woo said.
Toshiba needs to raise the money by March to repair its
balance sheet and avoid being delisted from the Tokyo Stock Exchange. Any
delay could result in it missing that deadline because of the time needed to
get regulatory approval and close the deal.
Woo also made the case that Toshiba is risking its future by
delaying. Besides the risk of delisting, he said Toshiba’s chips business will
fall behind if it can’t make investments quickly.
He specifically pointed to Samsung Electronics Co.’s
announcement last month that it will invest $7 billion on a new fabrication
facility in Xi’an, China, as a warning shot for Toshiba. Samsung is the largest
maker of memory chips and the plant will focus on NAND flash, the core product
of Toshiba’s business.
"You are jeopardizing your future, you are jeopardizing
your competitiveness," Woo said. Any successful bidder would need to stump
up enough cash to repair Toshiba’s finances and make major investments in the
business, the Japanese company has said.
This week, it said it’s going ahead with construction on a
new flash-memory plant in northern Japan while it prepares to expand its
Yokkaichi semiconductor facility in the country’s west.
The Foxconn group consists of customers that Woo says will
help create long-term, stable demand for chipsets, while the other consortiums
are led by bankers who will look to cash out, he said.
Apple depends on flash memory from Toshiba in its iPhones
and iPods, and wants a continued supply so it’s not dependent on Samsung, a
rival in the smartphone business.“We are offering something that I don’t think
anyone can refuse," said Woo.