TOKYO (Reuters) – Japan’s Toshiba Corp is buying $1 billion worth of equipment from joint venture partner SanDisk Corp, shoring up the California-based firm as it faces an unwanted takeover bid from South Korean rival Samsung.
SanDisk shares have halved in value this year in the face of a worldwide glut in chips, but analysts said the deal with Toshiba might help reverse some of losses, helping it fend off Samsung Electronics Co Ltd, the world’s No.1 memory chip maker.
SanDisk, the biggest U.S. maker of flash memory cards, holds key patents in such memory but the sliding market has left it in breach of key ratings covenants on its debt, and expected to announce a sharp drop in quarterly earnings on Monday.
"With banks tightening credit, it was important that Toshiba step in," said JP Morgan analyst Yoshiharu Izumi. "The move could make a takeover by Samsung less likely.
SanDisk has twice rejected an offer of $26 per share from Samsung, well above its current share price of $15.51.
Toshiba said it planned to buy about 30 percent of the equipment at a Japanese joint venture with SanDisk that makes NAND flash memory used in cellphones, digital cameras and MP3 players.
The two firms said the deal, including adjustments in lease payments, would release about $1 billion in cash to the struggling firm.
The move gives Toshiba, the world’s No.2 maker of NAND flash memory chips, 65 percent of the production capacity at the existing lines at the two firms’ joint factories, with SanDisk holding 35 percent, but ownership will remain at half each.
SanDisk would retain the option to buy some of the chips made by the equipment it sells to Toshiba, and said it planned to continue investing its half share in future.
Toshiba is also suffering amid the worldwide crash in memory prices. It is expected to post a quarterly operating loss of 30 billion yen, its first operating loss for the April-September period in five years, largely as a result of a slide in NAND flash prices.
Toshiba said it was still calculating how the move would affect its capital spending plans.