Western Digital tells Toshiba it is not free to sell

April 13, 2017 // By Peter Clarke
Disk drive maker Western Digital Corp. has sent a letter to partner Toshiba Corp. saying any plans to Toshiba has to sell its memory business to a third-party could not take place without Western Digital's consent.

Western Digital's position is based on the terms of a joint venture with Toshiba for the manufacturing of flash memory, which Western Digital gained as a result of its takeover of SanDisk in 2015. The actual breakdown of the joint venture is thought to be 49.9 percent ownership by SanDisk/Western Digital and 50.1 percent by Toshiba.

The letter, dated April 9, also expressed dissatisfaction with move taken on April 1 to spin Toshiba's semiconductor business off into new separate business and said that Toshiba should negotiate exclusively with Western Digital over the future of the business, according to a Reuters report.

The letter also argued that rumoured bids of 2 to 3 trillion yen for the business are too high. Western Digital's protest is being seen as a move to gain or maintain – depending on your point of view – an inside track on the sell-off process.

Western Digital would be concerned a company taking over Toshiba's half of the NAND flash memory manufacturing could make changes that disrupt production and harm its access to flash chips for inclusion in solid-state drives.

This is the latest blow to hit Toshiba in a sequence of troubles that have caused the conglomerate to consider sell offs and even question its own viability (see Toshiba casts doubt on its own survival ). What started as a plan to sell a minority interest in the profitable semiconductor business has escalated into a need to sell off the whole business to cover write-downs in Toshiba's nuclear power plant business unit.

The letter urged Toshiba "to cease acting as if Western Digital were simply a disfavored bidder in an open auction and instead enter into substantive, exclusive negotiations," according to the Reuters report.

Other bidders are reported to include SK Hynix, Broadcom and Skylake Partners, Hon Hai Precision Industries, which trades as Foxconn.

Despite the letter Toshiba plans to proceed with the sale as planned,