Corporate News Blog - US Court Postpones its Decision on Western Digital's Preliminary Injunction Hearing against Toshiba for Trying to Sell its Memory Chip Business
LONDON, UK / ACCESSWIRE / July 18, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for Western Digital Corp. (NASDAQ: WDC) ("WDC"), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=WDC. The US Judge of the Superior Court of California for the County of San Francisco did not give any decision on July 14, 2017, with regards to Western Digital's Preliminary Injunction Hearing against Toshiba Corporation and temporarily stopped it from selling its stake in the memory chip business. For immediate access to our complimentary reports, including today's coverage, register for free now at:
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The Court's decision
During the Preliminary Injunction Hearing Judge Harold Kahn of the Superior Court of California for the County of San Francisco directed both parties WDC and Toshiba to return to the Court on July 28, 2017, to discuss the matter. Judge Kahn's decision came in after he could not get both parties to agree to the wording of his order. In the meanwhile, Judge Kahn has directed Toshiba to give at least two weeks' notice to WDC before selling off its stake in the memory chip business.
Commenting on the Court's decision, Steve Milligan, CEO of WDC said:
"We are grateful for today's directive by the Court, which is a victory for Western Digital, SanDisk and our stakeholders. Our entire goal was to preserve and protect our rights through the binding arbitration process, and that's precisely what the Court has done today. This is the second time this week that the Court has acted to protect SanDisk's rights and interests against Toshiba."
Toshiba on its part has termed Judge Kahn's directive as a "finessed alternative to issuing a preliminary injunction". It has, however, agreed to not close the sale of its stake in the memory chip business until July 28, 2017.
Although Toshiba is free to continue negotiations on the sale of its memory chips business, the Court's (non) decision puts Toshiba is a tight situation. The sale of the memory chips business is very crucial for Toshiba. Toshiba is the world's number two supplier of memory chips after Samsung and the business accounts for the Company's one fourth of total annual revenues.
Backdrop and Litigation History
Toshiba Memory Corporation (TMC) was a wholly owned subsidiary of Toshiba as well as part of its JV with SanDisk and handled the memory chips business. In April 2017, it was split from Toshiba. As a result of the split, Toshiba transferred its interests in the JV to a subsidiary Toshiba Memory so that it could sell off the business via open auction to a third party. Toshiba had proposed to split many off its businesses and divest them in order to cover the losses from its nuclear reactor business.
WDC and its SanDisk subsidiaries file a Request for Arbitration with the ICC International Court of Arbitration in May 2017 in relation to three NAND flash-memory joint ventures with Toshiba Corporation. WDC had completed the acquisition of SanDisk and its business in May 2016. WDC's contention was that Toshiba's action to transfer its interest in the JV to Toshiba Memory was in violation of the anti-transfer provisions of the joint venture agreements. Any changes in the joint venture agreements required the consent of the JV partner, which in this case was SanDisk. Since SanDisk did not give its consent to transfer of interests to Toshiba Memory, it proves that Toshiba never intended to obtain SanDisk's consent before selling off the business of Toshiba Memory.
In June 2017, Toshiba announced the selection of the Consortium led by Bain Capital Private Equity L.P., Development Bank of Japan, and South Korean chip maker SK Hynix as the preferred bidder for the sale of TMC. The deal with the Consortium is valued at approximately $18 billion. In June 2017, Toshiba reversed the split and TMC again became part of Toshiba's business and part of the JV SanDisk LLC. This decision was taken so that it would be easy for Toshiba to attract buyers and complete the sale process
In mid -June 2017, WDC files a lawsuit in California to prevent Toshiba from completing the sale of Toshiba Memory to the Consortium before the arbitration process has a chance to be started. SanDisk, a subsidiary of WDC, is also a party to this case. Its attorneys were concerned that in the event Toshiba does not agree to the Court's order, the Court's jurisdiction would not be enforceable.
On June 28, 2017, Toshiba blocks WDC's access to certain databases, which Toshiba claims it had obtained improperly and also used some of the technical information stored by Toshiba and TMC on these databases. On July 06, 2017, WDC and SanDisk file a motion before the Superior Court of California seeking a temporary restraining order against TMC for blocking access to information. On July 12, 2017, the Superior Court of California confirmed that Toshiba and TMC do not have to give access to the database information exclusively owned by Toshiba or its affiliates including TMC. However, the Court gave WDC access to all other information that was available to WDC as on June 28, 2017. The hearing on the matter is set for July 28, 2017.
In early July 2017, Toshiba also filed an opposition to WDC's Motion for preliminary injunctive relief.
Last Close Stock Review
At the closing bell, on Monday, July 17, 2017, Western Digital's stock was slightly up 0.14%, ending the trading session at $94.57. A total volume of 2.56 million shares has exchanged hands. The Company's stock price skyrocketed 12.37% in the last three months, 33.20% in the past six months, and 83.06% in the previous twelve months. Moreover, the stock soared 39.18% since the start of the year. The stock has a dividend yield of 2.11% and currently has a market cap of $27.06 billion.
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