Toshiba Corp. (TOSYY) shares surged to the highest level of the year Monday in Tokyo after the group cut a deal to limit its exposure to its U.S. nuclear division and reports that Western Digital Corp. (WDC) will increase its bid for the troubled group’s flash memory unit.
Toshiba said Saturday that it reached an agreement with Georgia Power, a subsidiary of Southern Co., to pay around $3.7 billion to complete two nuclear reactors that were first constructed with the group’s now bankrupt U.S. energy division. Shares were given a further boost by a report from Reuters which said WDC would increase its bid for Toshiba’s memory division to around $18 billion, in conjunction with the the Innovation Network Corporation of Japan, before Toshiba’s self-imposed mid-June deadline to select a preferred bidder.
Toshbia shares rose more than 8% to change hands ¥325.10 each, the highest since last December, by the close of trading in Tokyo.
Toshiba needs to secure a sale for its semiconductor unit, the world’s biggest maker of NAND memory chips, in order to raise cash to satisfy the billions it must pay to its U.S. creditors as a result of the chapter 11 filing of Westinghouse earlier this year.
At the same time, the company has been sparing with Western Digital, its long-time partner in chipmaking, which claims that Toshiba has breached joint venture agreements by moving jointly owned operations into the memory unit for sale. Western Digital’s SanDisk unit owns a 49% stake in Toshiba’s main chip plant in Yokkaichi.
The U.S. group, in May, lodged a complaint with the International Court of Arbitration and demanded exclusive negotiations to buy the memory business, while at the same time moving ahead with its own bid for the unit.
Toshiba maintains that Western Digital has no right to contest the sale. Toshiba, last week, moved its stake in the JV back to the parent company from the memory business, claiming “this removes all grounds for WD’s complaint.”
It remains to be seen if the threat of legal action will sway Toshiba toward Western Digital’s bid, which is reported to be the lower of the two offers still under consideration.
Western Digital shares fell sharply Friday amid a broader sell off in U.S. tech stocks and ended the session 5.5% lower at $86.01 each but nonetheless holding on to a 27.1% year-to-date gain.