Toshiba Miss Deadline For Chip Business Deal

Apple has joined a consortium of companies led by the investment firm Bain Capital in a revised [$18 billion] last-ditch offer for Toshiba's chip unit. Western Digital says that it will not be forced out.

Toshiba is selling the profitable memory chip business because it needs to raise enough capital by March to avoid being delisted from the Tokyo Stock Exchange following a string of financial disasters, including accounting problems and cover billions of dollars of liabilities in its United States nuclear arm Westinghouse.

Under the group's proposal, Toshiba and Bain would own over 40 percent each of Toshiba Memory Corp, the sources said.

The Cupertino iPhone maker is in talks with Bain Capital to bid for the unit, in competition with a group that includes KKR & Co. and Western Digital Corp., according to people familiar with the matter.

Selling the profitable chip division is seen as the key to cash-strapped Toshiba's survival as one of Japan's best-known firms struggles to plug multibillion-dollar losses at its USA nuclear power division, Westinghouse Electric.

Others in the race include a consortium led by Toshiba's USA partner Western Digital and some buy-out firms and another that includes Taiwan-based contract manufacturer of electronic gadgets Foxconn. Apple is said to be interested in the business because it would give it greater control over its supply chain. But those talks lapsed as Japanese government investors who had been part of that consortium told Toshiba they were reluctant to close a deal in the face of the legal risks posed by Western Digital's demands.

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Lee Kyu-jin, a senior analyst with Ebest Investment & Securities, noted that Toshiba is facing an increasing competition from rivals like Samsung Electronics in the field of NAND chips.

Sources familiar the matter have said talks with Western Digital were in final stages but the two sides were struggling to come to an agreement over the US company's future stake in the business.

"That clearly appeals to Toshiba's impatient lenders but there are fundamental differences to resolve and it is still some way from producing a deal that Toshiba could sign".

Western Digital's group is reportedly also backed by INCJ and DBJ.

Complicating matters, Bain Capital resubmitted an offer, worth some $18 billion, at the last minute, bringing in Apple Inc to help bolster its bid, sources with direct knowledge of the matter said late on Wednesday.

Failure to clinch a deal in the next few weeks could mean that it may not clear all necessary regulatory approvals by the end of the financial year in March.

  • Rita Burton