Toshiba, Western Digital End Legal Dispute

Toshiba Corp. and its chip business partner, Western Digital Corp., agreed to settle a long-running dispute over the embattled Japanese conglomerate’s plans to sell its chip unit, the companies said in a statement, removing a key obstacle to the deal.

The two conglomerates ended a months-long legal spat that had threatened to derail the $18 billion sale of Toshiba’s flash-memory business and cut the U.S. company off from a future supply of vital new products.

Western Digital is dropping arbitration claims in the U.S. that were aimed at stopping the sale to a group led by Bain Capital. In return, the Japanese company will end its legal claims against Western Digital, the two companies said in a statement. Western Digital will be able to invest alongside Toshiba in two new chip plants in Japan and receive a guaranteed supply of memory chips.

As part of the settlement, Toshiba and Western Digital will extend existing agreements for their chip joint ventures in Yokkaichi, central Japan, until 2027 or later. The current agreements are set to start expiring from 2021.

The partners have been locked in a legal battle since early this year after Toshiba said it would sell the chip business to pay for enormous losses in its nuclear division. The U.S. company had argued Toshiba needed its consent to sell the business, an assertion the Japanese company disputed. Toshiba needed to raise capital to avoid seeing its shares delisted from the Tokyo Stock Exchange.

“As we at some point in the process moved down the litigation path, that was not our preferred path, that was not what we wanted to do,” Steve Milligan, Western Digital’s chief executive officer, said in a conference call. “We’re very pleased to be able to resolve this and put it behind us.”

The joint statement said both companies “have agreed on mutual protections for their assets and confidential information in connection with the sale of Toshiba Memory, and on collaborating to ensure the future success of Toshiba Memory as a public company following an eventual IPO.”

“We wanted to make sure that our interests in the JV were sufficiently protected and we had the right kind of protections and the right kind of access,” Milligan said.

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