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   Technology StocksWDC, NAND, NVM, enterprise storage systems, etc.


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From: Sam4/8/2021 7:57:24 AM
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Activists Get Their Moment in Japan With $21 Billion Toshiba Bid
By Gearoid Reidy and Min Jeong Lee
April 7, 2021, 4:15 AM EDT Updated on April 7, 2021, 8:09 PM EDT

CVC bid comes after Toshiba CEO lost crucial vote at EGM
After false dawns, ‘activism is taking hold’ in Japan: analyst

The surprise takeover bid for Toshiba Corp. is a palpable demonstration of the growing influence in corporate Japan of activist investors, who have gone from largely impotent onlookers to kingmakers in the space of just a few years.

The offer from CVC Capital Partners, while still in the early stages, comes just weeks after Toshiba Chief Executive Officer Nobuaki Kurumatani lost a landmark shareholder vote, forcing an independent investigation into alleged issues with voting at its annual general meeting last year.

That loss has piled pressure on Kurumatani, who barely won re-election at last year’s meeting and is seen as unlikely to survive another. The vote was triggered by Toshiba’s largest shareholder, the secretive Singapore-based hedge fund Effissimo Capital Management.

Any deal for Toshiba faces legal hurdles, and analysts say that investors such as Effissimo would likely insist on a substantial premium from Tuesday’s closing price. But the episode shows that the influence of activism in Japan is becoming hard to deny.

“There have been false dawns before,” said Justin Tang, head of Asian research at United First Partners in Singapore. “But activism is taking hold now.”

Flexing MusclesCVC offered about 5,000 yen per share in its buyout proposal, according to a Toshiba executive. A bid at that level would value Toshiba at about 2.28 trillion yen ($20.7 billion) and represent a 31% premium to its last close before news of the bid emerged, data compiled by Bloomberg show.

That would make it the largest private equity-led buyout since 2013, and CVC’s biggest acquisition on record. Toshiba’s board plans to form a special committee to consider the proposal, said the executive, who asked not to be identified discussing confidential information.

While there are many hurdles to a deal taking place, Toshiba shares rose by their daily limit of 18% to 4,530 yen per share at the close Wednesday in Tokyo. The stock gained as much as 5.7% more on Thursday.

“Considerable value would be created simply by simplifying ownership and clarifying governance by taking the company private,” said Nicholas Benes, an expert on Japanese corporate governance. “Precisely because of that, one would very much hope that this is a case where Toshiba will be open to other bids, by both other PE firms as well as strategic acquirers.”

Activist investors have increasingly been flexing their muscle in Japan in recent years, as corporate governance reforms promoting shareholder value have meant management can no longer dismiss such pressure. Tokyo Dome Corp. will be delisted this month after acquisition by a white knight last year to fend off pressure from activist investor Oasis Management Co.

Once a storied name in Japan, Toshiba has faded dramatically since its glory days after years of management missteps and scandal. The conglomerate invented flash memory three decades ago, but it was forced to sell most of its prized chip business in 2018 because of losses in its nuclear-power operation. That deal led to an infusion of cash -- but also a large contingent of more vocal shareholders. Last week, Singapore fund 3D Investment Partners became the latest investor to say it may make make proposals to management, boosting its stake to more than 7%.

“Any successes of this nature will probably snowball and lead to more activity,” said Damian Thong, an analyst at Macquarie Group Ltd. “There is a sense that a large part of Japan’s industrial base is being run inefficiently, resulting in apparent undervaluation of Japanese conglomerates.”

Kioxia Options

One open question for Toshiba is the future of Kioxia Holdings Corp., its former memory-chip division in which its still holds the biggest stake. Kioxia is focused on going public as soon as this summer in an IPO that could value the business at more than $36 billion, Bloomberg News reported last week. Alternatively, Micron Technology Inc. and Western Digital Corp. are each to be interested in acquiring the firm, the Wall Street Journal reported.

If Toshiba secures a reasonable market valuation for Kioxia, and its core businesses attract multiples similar to those of its Japan peers, Thong said he sees scope for over 1 trillion yen of shareholder value creation. That would imply a Toshiba share price of over 6,500 yen per share, compared with the CVC offer at 5,000 yen apiece.

Mio Kato of LightStream Research sees a low possibility of the deal going through under current terms, and expects volatile trading for Toshiba’s shares in the near term depending on how things develop. Toshiba’s shareholders, especially activists, will want a rather “steep price,” he wrote in a note published on SmartKarma.

Given the sensitivity around several of Toshiba’s bushinesses, including its deep involvement in decommissioning the wrecked Fukushima Dai-Ichi nuclear power plant, government approval would be required for the deal, Chief Cabinet Secretary Katsunobu Kato said Wednesday.

It’s unclear if a foreign firm such as CVC would be allowed to take control of Toshiba. The relationship between CVC and Toshiba executives -- with Kurumatani a former Japan president and external director Yoshiaki Fujimori still employed by the firm -- has also raised eyebrows.

“This could simply be an attempt to buy time for Kurumatani,” Kato said.

$20 Billion Toshiba Bid Puts Japan Activist Investors in Spotlight - Bloomberg

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To: Sam who wrote (4640)4/10/2021 9:53:00 PM
From: Unwelcomeguest
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I am just spitballing here, but I think Micron will make an offer to buy WDC to consolidate their NAND capacity with their own and sell off the HDD division to someone else. I don't think WDC has the capitalization or borrowing power to buy Kioxia, but MU could pull it off if they wanted to. But, why not just buy WDC for less and get half the capacity of the JV with WDC for a lower price? The $64,000 question is, what would the price be? If MU is able to work out a price with WDC before the Kioxia IPO is priced, they might make out better. Would WDC be willing to accept an offer before the Kioxia IPO? I suppose that depends on what they think of the offer.

As much as I think WDC would like to end up with Kioxia, I think they are dreaming. It's just too much for their pocket book and current debt level. So, if you accept that the industry is consolidating, WDC may not have the horsepower to compete with the remaining much larger players in the market after the Kioxia IPO unless WDC is purchased by MU.

Disclosure, I am holding both stocks, but I have reduced my WDC holdings to just a couple thousand shares and shifted capital to MU over the past few months.

UWG

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To: Unwelcomeguest who wrote (4641)4/10/2021 10:52:47 PM
From: Elroy
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MU wouldn’t have to spin off the WDC disk drive business, they could keep it and just manage it like what it is, a declining revenue cash cow.

If MU bought WDC all they would need to jump to the top of the industry is world class flash controller technology, ie.....SIMO! Stop selling controllers to SK and internalize SIMO and kapow! How’s SK going to move up the food chain when they can barely make a controller?

If MU can get their hands on WDC/kioxia/SIMO they’d be fierc3 competition for Samsung, and SK would be the third tier laggard left behind.

Yup!

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To: Unwelcomeguest who wrote (4641)4/10/2021 11:13:42 PM
From: Sam
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I am sure that everything is under consideration at this point. Geez, Toshhiba sure screwed the pooch when they bought that nuclear power division from Westinghouse. They were fleeced and have paid a steep price for not doing enough due diligence.

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To: Elroy who wrote (4642)4/12/2021 12:00:37 PM
From: SiliconAlley
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MU wouldn’t have to spin off the WDC disk drive business, they could keep it and just manage it like what it is, a declining revenue cash cow.

Disk drive revenue is increasing, not decreasing. HDD growth remains healthy in the enterprise.

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To: SiliconAlley who wrote (4644)4/12/2021 12:22:29 PM
From: Elroy
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Disk drive revenue is increasing, not decreasing.

Sounds hard to believe. What is the last year where WDC had year on year growth in disk drive revenues?

HDD growth remains healthy in the enterprise.

Really? What’s the revenue growth rate of enterprise disk drive revenues at WDC?

My impression is that disk is a low cost, zero to negative growth cash cow, slowly being replaced by higher and higher capacity NAND flash storage. But NAND technological advancement has massive capital cost requirements, so this transition is slooooooooooooooooow.

Slow, but ongoing.

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To: Elroy who wrote (4645)4/12/2021 2:32:30 PM
From: SiliconAlley
   of 4711
 
My impression is that disk is a low cost, zero to negative growth cash cow

Your impression is wrong, because you don't understand the market. The projected CAGR is 5.3% through 2030. You could easily find this if you do your homework.

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From: Sam4/14/2021 8:18:37 AM
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Controversial Toshiba CEO steps down, shares jump on bidding war expectations
By Makiko Yamazaki
Reuters April 14, 2021 04:57:00 AM ET

TOKYO, April 14 (Reuters) - Toshiba Corp CEO Nobuaki Kurumatani resigned on Wednesday amid controversy over a $20 billion buyout bid from CVC Capital Partners and the conglomerate's shares surged on reports that KKR & Co and Brookfield are also planning offers.

Satoshi Tsunakawa, who led the company before Kurumatani and until Wednesday was chairman, will once again assume the helm.

Kurumatani had been under fire over the bid from CVC, his former employer, as well as damaging allegations that investors were pressured before a shareholder meeting to support desired board nominations.

CVC's offer to take the scandal-hit Japanese conglomerate private and retain incumbent management was perceived as designed to shield Kurumatani from activist shareholders who have successfully pushed for an independent probe into the allegations, sources familiar with the matter have said.

The offer sparked a strong backlash from Toshiba managers, prompting them to lobby against it to the government, said one of the sources. The sources declined to be identified due to the sensitivity of the matter.

"Tsunakawa has the trust of various stakeholders," Toshiba Board Chairman Osamu Nagayama told a news conference, adding that Kurumatani had told the board that he was stepping down as the company's recovery was now firmly in place.

People familiar with matter said, however, that two board members had told Kurumatani they planned to oust him due to his slumping support among shareholders and staff, and that the CVC offer had only accelerated the move.

Nagayama said CVC's April 6 proposal was unsolicited, lacked substance and required cautious consideration. He noted that a law which restricts foreign ownership in Japanese companies with important technology would have to be taken into account.

Toshiba would consider setting up an independent committee of external directors after receiving a formal proposal from CVC, he added.

Tsunakawa, who has a reputation for being on better terms with Toshiba's large activist shareholder base, said the company needed to rebuild trust with investors and acknowledged there was room to improve governance.

The Toshiba shareholder vote last month for an independent probe was a watershed victory for corporate governance in Japan, marking the first time that a motion by an activist shareholder has won approval at a major company.

Both Nagayama and Tsunakawa suggested current management did not intend to be place for too long.

"I am aiming to complete my mission quickly and hand over to the next generation," Tsunakawa said.

Shares in Toshiba closed 6% higher at 4,860 yen, which compares with the 5,000 yen per share level that a source has said was proposed by CVC.

Other suitors appear to be waiting in the wings.

Private equity giant KKR & Co is considering a buyout offer that would exceed CVC's, the Financial Times has reported, citing several people briefed on the plans.

Canada'sBrookfield Asset Management Inc is in the preliminarily stages of exploring an offer, Bloomberg News reported, citing a person with knowledge of the matter.

A representative for KKR Japan declined to comment. Brookfield did not immediately respond to a request to comment.

KEEN ON KIOXIA

Battered by accounting scandals, massive writedowns for its U.S. nuclear business as well as the sale of its semiconductor unit, the once-storied conglomerate is a shadow of its former self.

That said, it remains one of Japan's few manufacturers of nuclear power reactors and makes defence equipment including lithium-ion batteries for submarines, meaning any sale of Toshiba would need government approval.

Toshiba also retains a 40% stake in Kioxia Holdings Corp, its former chip unit which is controlled by U.S private equity firm Bain Capital. It has promised to return to shareholders a majority of gains made from reducing its stake in a planned Kioxia IPO and to gradually unwind the holding after Kioxia is listed.

Kioxia's fortunes have only risen amid a deepening global shortage of semiconductors as consumers spend much more time at home due to the coronavirus pandemic, boosting demand for premium electronic devices as well as more data centres.

Tsunakawa said there was no change in Toshiba's plans to support the Kioxia IPO.

Micron Technology Inc and Western Digital Corp are individually exploring a potential deal for Kioxia that could value the firm at around $30 billion, the Wall Street Journal reported last month.

At the time, Micron declined to comment, while Western Digital and Kioxia did not respond to Reuters' requests for comment.


reuters.com

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To: Sam who wrote (4647)4/15/2021 1:08:07 PM
From: Bruno Cipolla
1 Recommendation   of 4711
 
TOKYO (Reuters) - Japan Investment Corp (JIC) and Norinchukin Bank are considering buying Toshiba Corp, the Nikkan Kogyo Shimbun reported on Thursday, a Japan-led bid which may be more palatable to regulators and management than rival offers by foreign funds.

Private equity fund CVC Capital Partners, which has already made a preliminary offer for Toshiba, may join the bid to take the conglomerate private, but the Japanese funds would lead the offer, the newspaper said.

The newspaper said other government-affiliated funds may join the bid.

JIC declined to comment when contacted by Reuters, whereas Norinchukin officials were not immediately available.

CVC earlier this month proposed to take Toshiba private, and is expected to soon provide details of its $20 billion proposal.

The chairman of Toshiba's board has criticised CVC's offer so far as "lacking in substance", and has also said it would require cautious consideration due in part to regulations over foreign investment in Japanese companies with strategic technologies.

Toshiba's technology is used in missile guidance and other defence systems, for example.

Media reports have also named KKR & Co Inc and Brookfield as also considering offers for the company. The Nikkei newspaper on Wednesday said CVC was planning to team up with Bain Capital.

The latest report comes a day after Toshiba appointed a new chief executive after controversy over previous leader Nobuaki Kurumatani who faced criticism over governance issues.

(Reporting by Takashi Umekawa and Makiko Yamazaki; Writing by Ritsuko Ando; Editing by Shri Navaratnam and Christopher Cushing)

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From: BeenRetired4/16/2021 8:47:49 AM
   of 4711
 
Where's the SanDisk (oops, WDC) Gelsinger. Sanjay? anyone?...anyone?...

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