BainCapital consortium's acquisition_of_Toshiba_chip_biz

MinJae Lee
Bain Capital Consortium’s
acquisition of Toshiba Memory
Case Study of 2019 Law and business of IB class, SNU Law School

mega deal with various players & complex financial structure
2nd largest PE deal, and 2nd largest semiconductor M&A in 201811)2)
1) 2018 in Review: Top 5 global PE deals, exits & funds, Adam Lewis, Pitchbook,
2019.01.08 2)The 10 Biggest Semiconductor M&A Deals in 2018, Synced, 2019.04.26

Table of contents
I. Memory semiconductor market
II. Toshiba’s memory department
III. background of the Deal
IV. Major players of the Deal
V. Whole deal process
VI. Financial structure of the Acquisition
VII. Endgame: preparation for IPO

Types of memory semiconductor
Memory
Semiconductor
RAM
(Random Access Memory)
ROM
(Read Only Memory)
DRAM
SRAM
RDRAM
DDR
SDRAM
SDRAM
EPROM EEPROM FLASH
NAND
FLASH
NOR
FLASH
Only DRAM and NAND Flash are widely used in industries

DRAM and NAND FLASH
1) HIS market 2) DRAMeXchange
NAND FLASHDRAM
Market size1)
Competition
Usage
Cheap and dense memory chip used
everywhere that needs to store data
 PC HDD, Graphic card, Smart phone, cloud
server
Mostly used in small and light digital devices
 PC SSD, Smart Phone, tablet, USB, Digital
camera
45
40.2
45.9 46.3
20
30
40
50
2015 2016 2017 2018
b$
46.3 billion$
in 2018
33.8 36.2
41.6 42.4
20
30
40
50
60
2015 2016 2017 2018
b$
42.2 billion$
in 2018
41.3%
31.2%
23.5%
2.4%
Market Share 4Q 20182)
30.4%
19.3%15.4%
15.3%
11.2
8.3
Market Share 4Q 20182)

Characteristics of the memory semiconductor industry – 1/3
1.Extreme Mass Production
Single memory chip can be
embedded in any device that
needs to store data.
There are only 2 major types:
DRAM and Nand Flash.
Single generations of DRAM/
NAND Flash are made in
enormous factories which is
built for one generation of that
chip only
Versatility of Memory Chip
Mass production
of Limited Items
Economies of Scale
because of
1) huge investment on mass
production lines
2) purchase of parts &raw
material
strong economies of scale rule
the industry

2. Extreme Cyclicality of the Industry
Memory chip business is very cyclical because:
1) (Only Memory) There are only 2 major production -> No Diversification
2) (Common feature) the demand soared when new usage of memory chip was found (PC -> Laptops -> Mobile phone)

1) UC Insights’ Strategic Reviews database
3. Enormous & Continuous Investment in R&D
- Success of semiconductor business relies heavily on R&D. As new generation of chips dramatically depreciate
the value of old versions all companies are forced to constantly reinvest much of their profit into R&D
- Although Non-memory chip makers has much higher R&D/Sales ratio than memory chip makers,
Memory chip makers spends more than 8 billion$ in 2017
Firms focusing on memory chip

Formation of oligopoly
Cyclicality
Economies of
Scale
Continuous
R&D
big companies with large
factories can achieve
higher profitability
Companies have to
undergo heavy loss
during the down cycle
High entry barrier exists
because of a need for
advanced technology
and massive factories
<Chicken Game>
Features above are perfect conditions for Chicken Game.
Major players(often Samsung) who have better profitability and financial stability,
lower the price dramatically and endure loss to eliminate competitors
DRAM is dominate by 3 firms And NAND Flash has 5 major players

Intervention of government on the industry
When one of major player is being
sold. There aren’t many companies
who can buy that one.
So, another market leaders (from
other countries) become the potential
buyer
Enormous Size of Firms
As state-of-the-art semiconductor
technologies require great amount of
investment and long time, secret
outflow is a big issue.
So, each government fears the leakage
of semiconductor to other nations
Technologies as State Secret
Government wants to intervene the selling process of semiconductor firms
to limit the leakage of technologies to foreign companies

Recent ‘Super Cycle’ of memory semiconductor industry
유진투자증권, 반도체 슈퍼사이클 논란 점검 2018.8.30
buyer sideSupplier side
Advent of various new consumer
devices like Smartphone and Tablet
PC, and increased use of graphic card
in PC
End of last chicken game left only 3
giants in DRAM and 5 in NAND flash,
which strongly limits the competition
Increasing demand from AI technology
and Cloud computing since 2016
These corporation clients usually have
low price elasticity, which lead to
higher profitability of chipmakers
Due to physical limitation of micro
electro mechanic technologies,
increase of supply started to slow
down
‘Supper Cycle’ started in 2013 and boosted in 2016,
showing higher profitability and lasting longer than usual upper cycles

II. Toshiba’s memory
department

Toshiba corporation
Japanese electronics conglomerate founded in 1936
Major departments were consumer electronics, PC, energy & infra, and semiconductor

1. History of Toshiba memory department
1875
‘Shibaura Seisaku-sho’
was founded
Toshiba was born after
Merger of Tokyo Electronics
and Shibaura Seisaku-sho
1939
1987
Invention of world’s
first NAND flash
World’s first mass production
of NAND flash memory
1991
2007
World’s first 3D flash
memory announced

2. Position of Toshiba memory in the market
1) DRAMeXchange
37.1%
18.3%
17.7%
10.6%
9.6
6.8
Quarterly market share of NAND Flash from 2010 to 20161) NAND Flash market share of 4Q16, just before the deal1)
Toshiba has secured the No.2 position in NAND Flash, but gradually lost market share

1. Seller side: Accounting scandal of Toshiba (2009 - 2013)
1) Sony investor relation
Due to the success of Korean electronics corporations, Japanese companies like Sony,
Panasonic, Sharp faced losses since 20081)
Stagnation of Japanese Electronics business
Toshiba showed substantial profit in 2009~ 2013. Although its electronics department faced
deficit in 2011 just like its Japanese competitors, Toshiba reported great profit from its
semiconductor and infrastructure department
Relatively Good Performance of Toshiba
- In 2015, It turned out that Toshiba had overstated operating profit through accounting
fraud.
- The fraudulent action was performed by the order of 3 consecutive CEOs
- The amount was $1.3billion, which is one third of its operating profit during 2009-2013.
- Toshiba lost the trust of investors
Truth: Gigantic Accounting Fraud

1. Seller Side: Disastrous financial status of Toshiba
1) Moody’s credit rating
- Westinghouse, the nuclear energy
subsidiary of Toshiba, reported loss of
$7billion for compensation for delay of
construction of nuclear plants in Dec 2016
2 hardship in electronics business
1 Heavy loss from infrastructure business
Net worth become - $5.5bWorsened situation
Credit rating plunged by 8 tiers
baa2(2015) -> Caa1(2017)1)

1. Seller side: Continuous selling of subsidiaries and departments
Image Sensor
Consumer electronics
Toshiba Medical
systems
TV department
Landis+Gyr
(Energy subsidiary)
IPO in Swiss
2017.07
2016.03
2016.03
2015.10
2017.11
Decided to sold the most profitable segment,
Memory semiconductor
Desperate need to get out of ‘negative net worth’
Unable to generate
enough cash because
of low value of
business being sold

2. buyer side: Super Cycle of memory chip industry
Intrigued by high profitability of
the memory business
Financial Investors
Retained enough cash to make
acquisition for diversification &
economies of scale
Competitors
Want to achieve stable supply
of memory chips by taking
control of chipmaker
Customers
Exceptional number of firms were interested in
Toshiba Memory Department
Memory Semiconductor
Super Cycle

China’s dependence on foreign semiconductors has worried Beijing for decades.
China suspects that Western semiconductors contain “backdoors,” intentional
vulnerabilities that can be exploited for intelligence and military purposes. In 2016,
President Xi Jinping said, “the fact that core technology is controlled by others is our
greatest hidden danger.” Vice Premier Ma Kai said at the 2018 National People’s
Congress, “We cannot be reliant on foreign chips.”1)
As part of the ambitious “Made in China 2025” blueprint, Chinese officials have set
the semiconductor industry a goal of reaching US$305 billion in output by 2030, and
meeting 80 percent of domestic demand. In 2016, China produced US$65 billion of
semiconductors and supplied 33 per cent of the domestic market2)
2. buyer side: advent of China in memory chip business
1) Xi Jinping, “Speech at the Work Conference for Cybersecurity and Informatization,” (speech,
beijing, April 2016). 2) Marcelo Duhalde and Yujing Liu, “Made in China 2025’: How beijing is
boosting its semiconductor industry”, South China Morning Post, sep 25, 2018
Existing major chipmakers wanted to prevent Chinese firms from
absorbing the technologies and know-how by acquisition

1. The Seller, Toshiba and Japanese government
In Feb. 2017, Toshiba was in desperate need for cash
in order to
1) escape from negative net worth
2) make investment in new business in AI and IoT
So, Toshiba wanted to sell its memory department
as fast as possible, in moderate price
To limit technology leakage to other nations, put
pressure on Toshiba
1) Not to give management right to foreign firms
2) Refrain from selling memory department to a
country that doesn’t have memory chip technology

2. Bidders
Consortium led by
Private Equity Bain Capital
Competitor in NAND flash,
ranked 3rd place
next to Toshiba
Consortium led by Foxconn,
One of the major customer
of memory chips
Consortium of broadcom(no3
in system semiconductor) and
Silverlake Private Equity

2. Bidders – Bain Consortium
1) https://www.privateequityinternational.com/database/#/pei-300
Participants are all considered strategic investors( except for leader, BainCapital)
Horizontal integration Customers: for stable supply of chips
- Korean memory chipmaker looking
for diversification.
- SK Hynix is no2 in DRAM( 31.2%),
but market share in NAND Flash has
been relatively low(11.2%)
- No.2 Maker of hard disk drive- Maker of SD card
- Major PC maker
- World’s largest hardware maker
(smartphone, PC, Tablet, etc)
- US based Private Equity. 11th largest firm by PE capital raising in 5 years1)

2. Bidders – Western Digital Consortium
1) https://www.privateequityinternational.com/database/#/pei-300
Participants are all considered financial investors( except for leader, Western Digital)
Japanese government-back financial institutions
- US based private Equity. 3rd largest PE
by capital raising in 5 years1)
- Western Digital owns Sandisk, which is no3 in NAND flash.
- WD and Toshiba co-own a joint venture that runs Yokkaichi memory chip factory
Private equity as financial investor
- DbJ is a state-owned bank investing in Japanese industries
- INCJ is a public-private partnership fund between the
Japanese government and 19major corporations
- They are brought into the consortium to get favorable
reaction of Toshiba and Japanese government

2. Bidders – Foxconn(Hong Hai) Consortium
Participants are all considered strategic investors
Customers: looking for stable supply of chips. Major buyer of Foxconn as well
- World’s largest hardware maker
(smartphone, PC, Tablet, etc)
- World’s largest cloud computing service provider
- OEM maker of Apple and various IT hardwares. Major customer of Toshiba memory

Broadcom – Silverlake Consortium
Alliance between Strategic Investor and Financial investor
Horizontal integration
- Broadcom was no.3 in system
semiconductors, and no.5 in whole
semiconductor industry in 2017
- With its abundant cash, Broadcom wanted
horizontal integration of Toshiba Memory for
diversification
Private equity as financial investor
- Silver Lake is an American private equity
firm focused on leveraged buyout and growth
capital investments in technology,
technology-enabled and related industries
- It had invested in Broadcom, Dell, Alibaba,
Skype, Symantec, Seagate Technology and
NASDAQ

Bidding process: fierce negotiation & alliance among bidders
日민관펀드-KKR 컨소시엄에 SK하이닉스-베인 합류 움직임 애플·델 끌어들
인 훙하이 "日 국제입찰 방해말라" 신경전, 매일경제, 황형규 & 정욱
2017.6.13
Phase 1 Phase2 Phase3
Preliminary bid due date
More than 10 Firms &
Consortium applied
2017.03.29 2017.05.19
2nd bid due date
Candidates form
alliances to win the deal
KKR formed alliance with
Japanese institutions to
facilitate deal
Foxconn led the
‘customer alliance’
SK Hynix allied with
BainCapital to retain
enough cash
2017.06.29
Bain Consortium
became preferred bidder
KKR
consortium
allied with WD
BainCapital drew
Japanese
institutions into
the consortium

Offer of BainCapital consortium, the preferred bidder
SPC
Holding 100% of
Toshiba Memory’ share
fund
loans
51% of share
For $10 billion
49% of share
Management buy out
Enable former management to
maintain some control over the firm
Convertible
bond

Legal disturbance of Western Digital
- Toshiba and Western Digital have joint venture that own the management right of 3 among 5
factory lines in Yokkaichi, the NAND flash industrial complex.
- So Western Digital have legal ownership on part of Toshiba memory’s property and technologies
SanDisk (WD’s memory chip subsidiary) filed
injunction of Toshiba’s deal with Bain consortium,
arguing that anti-transfer provisions between
Toshiba and SanDisk, which govern their NAND flash
memory joint ventures ("JV agreements"), explicitly
require that Toshiba obtain SanDisk's consent prior
to any transfer of JV interests.
SanDisk also filed Arbitration with the International
Court of Arbitration. The arbitration demand seeks an
order requiring Toshiba to unwind the transfer to
Toshiba Memory, and injunctive relief preventing
Toshiba from transferring its Flash JV interests
without SanDisk’s consent
WD’s ownership of part of Toshiba Memories property
1 Injunction in California superior court 2 Arbitration with the ICC
Toshiba win
Court didn’t order injunction
As ICC trial usually last longer than 1 year, it was
fatal for Toshiba, who had to make deal quickly
Toshiba cancelled the deal with Bain consortium
and designated WD consortium as new preferred bidder

New competition among 3 consortiums
매일경제, 日민관펀드-KKR 컨소시엄에 SK하이닉스-베인 합류 움직임
애플·델 끌어들인 훙하이 "日 국제입찰 방해말라" 신경전, 정욱, 2017.6.13
consortium consortium consortium
Pros
- Participation of Japanese
institutional investors
- Offer a deal that leave
management right to Toshiba
- Partnership with Toshiba memory
in Yokkaichi factories
- Participation of Japanese
institutional investors
- Highest bidding price ($30b)
that comes from high liquidity of
Foxconn and its partners
cons
- Worries about technology
leakage and antitrust issues,
because of 15% convertible
bond of SK Hynix
- Financing issue. WD lacks cash
after spending $ 19b in 2016 to
acquire SanDisk
- As WD(owner of NAND flash no.3)
want management rights,
Antitrust issue will be raised after
the acquisition.
- Japanese government’s fear of
technology leak to china
WD and Foxconn consortium strongly claim the management right, and that has
eliminated Toshiba & Japanese government’s will to make a deal with them

Winner: the Bain consortium
도시바메모리 인수전…SK하이닉스 '묘수' 통했다, 한국경제, 좌동욱, 2017. 9.20.
BainCapital newsroom
Participation of HOYA corporation,
Japanese company that
manufactures optical instruments
Continuous promise that SK Hynix
will not threat the management
right of Toshiba memory
Participation of Apple, one of the
largest customer of Toshiba
Toshiba signed Definitive agreement
with Bain Consortium at 2017. 09. 28

Last obstacle: Antitrust regulation and improvement of Toshiba’s situation
- The deal easily received permission from antitrust
regulators in US, EU, Japan, South Korea, etc.
- but Chinese antitrust board did not give
permission for 6 month, without any explanation
Antitrust regulation Toshiba got out of the crisis
- Toshiba got out of negative net worth by
1) making profits from memory department
2) successful sales of Westinghouse securities
3) Tax cut of US government
4) $6b capital increase with consideration
and recorded $4.6b of equity in b/s
- Bain Capital consortium and Toshiba was unable to sign a contract until deadline(march. 2018)
- As Chinese officials does not seem to approve the deal, and Toshiba’s shareholders and Japanese
people are unsatisfied with selling precious department in relatively low price, Toshiba considered
dropping the Deal
- Toshiba sent Ultimatum to China that if they didn’t approve deal in May, they would cancel the deal
Deal is completed after Chinese government give unexpected permission in May 17, 2018

Signing of the contract
Summary of final contract
• Takeover price: $36 billion
• Date of acquisition: June 1, 2018
Just after payment have been made
• Duration of deal Process: Lasts 14 month from preliminary bid to actual
acquisition
• Result: Only Toshiba, BainCapital consortium, and Hoya directly possess equity of
‘Toshiba memory corporation’
• IPO: investors agreed to go on IPO within 3 years after the deal

Major player’s attitude toward conclusion of the deal
Chinese government allowed the acquisition
because they concluded that it is a better
option for Chinese chipmakers. They thought
when Toshiba memory was acquired, it might
lose competitiveness because of slower
decision making of many investors
Japanese government is very satisfied
with the deal because it has secured
management right in the hands of
Japanese companies.
Toshiba makes appropriate deal.
Although Toshiba memory was very
profitable in 2017, Toshiba didn’t have
enough cash to invest in R&D to maintain
their position in the market. Selling Toshiba
memory was inevitable option.
SK Hynix is trying to make synergy between its DRAM business
and Toshiba memory’s NAND flash. It is suspected to have
plans to expand its share more than 15% after potential IPO
WD dropped the deal and finished dispute with Toshiba in Dec
2017. The settlement calls for WD to drop arbitration claims
seeking to stop the sale to the Bain consortium in exchange for
Toshiba allowing WD to invest in a new production line for
advanced memory chips
Unsatisfied with their failure, Foxconn
announced in 2018 that it will build its own
semiconductor business.
After they signed contract, Bain Capital started to consider
various strategy to maximize their IRR at the time of exit.

VI. Financial structure
of the Acquisition

Financial structure of Toshiba memory before the deal
memory
department
TV
department
Energy
department
radar
department
….
Toshiba memory was just one department of Toshiba corporation, not a
subsidiary company. It was financially integrated in Toshiba corporation as
well.

Financial structure of Toshiba memory after the deal
consortium
KK Pangea
(special purpose company)
9.9%
of common share40.2%
of common share
49.9%
of common share
100% subsidiary
(Original owner) (Japanese corporation)
BainCapital consortium promised to
get $5.5b loan from Japanese banks
-> realized loan is $11.7b in 2018
In total, $18b(¥1,985b) is invested
PEF LP,
CB RPS
Invest $9.29bInvest $2.63b Invest $0.63b

1. Strategic meaning of 3 owners of ‘common share’
Pangea
(BainCapital Consortium)
(Original owner)
(Japanese corporation)
9.9%40.2%49.9%
50.1%
- Management right remain in Japan as long as
Toshiba and HOYA maintain their share
- Critical structure that draw permission of japan
49.9%
VS
- Enough share to influence Toshiba
memory on a behalf of Toshiba
memory’s customer who invested in
Pangea.
- Financial investors are mainly
satisfied by investment other than
ordinary share

2. Financial structure of Pangea
Pangea
KK Pangea
(special purpose vehicle)
Convertible bond
Common share
(Voting right)
Project PEF
$1.15b$3.23b
$0.82b
$2.41b
Redeemable
preference share
US alliance
$4.9b
$1.1b $1.5b
$1.25b $1b
$0.27b
bCPE Pangea Cayman, L.P.

2. Financial structure of Pangea – 1) necessity of Special purpose vehicle
- SPV is also used to limit the loss of
investors. Even though investment
was a total failure, investors can
simply file a bankruptcy of SPC and
prevent additional damage to their
assets.
- Multiple layered SPV are used to
set order of right of payment among
investors, just like different trenches
in CDOs.
- SPV can be a useful medium of
communication for decision making
process.
- It is especially important for
acquiring public company, because if
SPV does not exists, investors can
easily walk out on consortium by
selling share and thereby jeopardize
the consortium’s control over firm(it
does not applied to this case)
regulation on transfer of stock
- SPV are established in tax haven
(Cayman islands in this case ). By
doing so, investors can evade
double taxation.
- When financial investor want exit,
it can easily sell SPV’s equity, rather
than selling share of acquired
company which is bound to complex
regulations.
2 Bankrupt remoteness1 Evading regulations & tax 3 Mean of communication
In order to protect benefit of investors, SPV become necessity in PE deal
SPV: a legal entity (limited company or limited partnership) created to fulfill specific, temporary goals

2. Financial structure of Pangea – 2) BainCapital Project PEF
(Official name: BCPE Pangea Cayman, L.P.)
BainCapital
(GP)
BainCapital is general partner (GP). Just like ordinary Private equity
funds, partners of BainCapital runs the fund and take full
responsibility regarding the result of this PEF
SK Hynix
(LP)
SK Hynix participates in this PEF as limited partner and provides $0.82
billion in a form of ‘loan’ to BCPE Pangea Cayman, L.P.. It have a
purpose of ensuring Japanese government and Toshiba that SK Hynix
will not threaten management right of Toshiba Memory
Other LPs
They are various financial investors(rich personnel or institutional
investors) who put their money on BainCapital PE.

2. Financial structure of Pangea – 3) Convertible bond of SK Hynix’s
1) investopia
Convertible bond is a fixed-income debt security that yields interest payments, but can be
converted into a predetermined number of common stock or equity shares. The conversion
from the bond to stock can be done at certain times during the bond's life and is usually at
the discretion of the bondholder1).
1 Definition of convertible bond
For investors, convertible bonds offer both (relatively) stable profit and possibility of
participation in management of firm. So, they can make a choice in later days, according to
performance of the company. For issuers, convertible bonds have slightly lower interest rates
than ordinary corporate bonds.
2 Advantages of convertible bond
SK Hynix choose the form of convertible bond to achieve 2 goals simultaneously
1) They want participation in management of Toshiba memory in the long run. It is plausible
that SK Hynix might become major shareholder after conversion of CB ( and potential
accumulation of share after the appointed IPO of Toshiba memory)
2) However, SK Hynix have to relieve Toshiba and Japanese government’s fear for takeover of
management right, to achieve the deal.
So SK Hynix propose Convertible bond of 15% of common share as a point of compromise
2 Why convertible bond in this deal?

2. Financial structure of Pangea – 4) RPS of Apple, Dell, Seagate, & Kingston
1) 10 FAQs About Redeemable Preference Shares, Nadine Martino, LEGALVISION
2) For preference shares, when is debt classified as equity?, Melanie Goetz,
KPMG Luxembourg Expert blog,
Redeemable preference shares is a type of preference share. A company issues them to
shareholders and later redeems them. This means the company can buy back the shares at a
later date. The option can be given to issuer or investors, but in reality, issuer usually have
option. RPS pays fixed dividends just like ordinary preference shares
1 Definition of redeemable preferred share
Redeemable preference shares are hybrid securities, which generally combine debt and
equity1). However, preference share that is redeemable only at the holder's request may be
accounted for as debt even though legally it is a share of the issuer. This could be because the
substance of the terms and conditions requires the issuer to deliver cash or another financial
asset to settle a contractual obligation2)
2 RPS is considered as ‘debt’, although it is legally ‘share’
Investment of US companies are considered loan,
because investors have option of RPS

3. Toshiba’s reinvestment in Toshiba memory corporation common share
1) 10 FAQs About Redeemable Preference Shares, Nadine Martino, LEGALVISION
2) For preference shares, when is debt classified as equity?, Melanie Goetz,
KPMG Luxembourg Expert blog,
(Japanese corporation)
consortium
$0.63b
E
$3.23b
- Toshiba reinvests $2.63b it received from buyers to newly born KK Pangea. It does not require
any cash expenditure from Toshiba
- By limiting the investors’ investment in common share and taking the form of reinvesting,
Toshiba saves 40.2% of common share (and voting right), without any financial burden
KK Pangea
Reinvest $2.63b
E

4. Promised loan from Japanese commercial banks
After the negotiation with Japanese banks, BainCapital and its Japanese partner, INCJ and DBJ
give legally binding promise to Toshiba that Japanese banks will provide $5.5b loan
Original promise: $5.5b loan
It has announced that Toshiba memory will get a total of $11.7b in April, 2019 to prepare for
IPO, as well as to improve its competitiveness in the market.
Result in 2019: $11.7b loan
3 commercial banks will invest $9.1b in
a form of loan
DBJ investes $2.7b
in a form of RPS
INCJ decide not to
invest at last moment

VII. Endgame:
preparation for IPO

End of memory chip Super Cycle is earlier than expected
VII. Endgame: Preparation for IPO
1) 5 Warning Signs The Memory Super Cycle Is Ending, Robert Castellano
2) DART
On Nov 26, 2017, Morgan Stanley analyst Shawn Kim warned that Morgan Stanley see
downside risk as NAND prices have started to reverse in 4Q17. Meanwhile, visibility on DRAM
supply-demand dynamics has reduced beyond 1Q181)
1 Morgan Stanley warns the peak of Super Cycle
2 Beginning of downturn in data
Since 2018, excess demand phenomenon diminished,
and chip prices drop sharply
0
2
4
6
8
10
12
revenue profit
Samsung’s DRAM, NAND price change ‘16-’181)
Chipmaker’s revenue and profit started to fall
₩10b SK Hynix’s performance2)

Reaction of investors to changed situation
End of Memory chip Super Cycle
-> possibility of decreasing value of Toshiba memory
Seek an early exit to realize profit
before value of Toshiba memory
corporation is decreased because
of worsening performance of
memory chip market
Eagerness for Toshiba memory has
decreased, because
1) Of worsening market
2) SK Hynix developed 96-layer
NAND flash, thereby taking
superiority over Toshiba memory
US customers start to consider exit
as an option. This is because need
for stable supply of NAND flash has
decreased, due to the settlement of
excess demand problem
Investors decided early IPO to realize their profit

Expected outline of future IPO & exit of investors
Lead
underwriter:
Various Investors
RPS
$11.7b
Common share
(voting right)$ ??b
US alliance
(KK Pangea)
$4.9b+
Redeem
RPS
15% of common share go to
SK Hynix if they convert CB
Investment on R&D
And addition factories

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