Western Digital no longer favoured in Toshiba chip bid

Toshiba is seen on a printed circuit board in this

While Western Digital is very much in the driver's seat in talks, it has made several key concessions to secure a deal that Toshiba is willing to accept and that will keep the unit out of the hands of rival chip firms, sources have said.

Toshiba Corp. (TOSYY) said Wednesday that it has signed a letter of agreement to sell its prized memory chip unit to a group of bidders led by Bain Capital LLC, potentially marking the end to the prolonged sale process that looks to eliminate Western Digital Corp.

Other suitors in the frame are a group led by Western Digital, Toshiba's US-based chip factory partner and Taiwan's Hon Hai Precision, better known as Foxconn. Toshiba has to raise at least $18 billion from the sale so it can escape negative shareholder equity and cover the billions of dollars in liabilities incurred by USA nuclear subsidiary Westinghouse. Western Digital, Toshiba and a state-backed fund, the Innovation Network of Japan, which is a member of the consortium declined to comment.

As Toshiba stated in an announcement on August 31, that the company has been in continuing negotiations with three consortia of potential purchasers of TMC.

Western Digital gained a stake in the Toshiba unit as a result of its $15.8 billion SanDisk acquisition.

SK Hynix is providing finance, but it is possible that this could be turned into a share stake at a later date, after the deal is approved by the Japanese government.

The latest decision comes after Toshiba had been inclined to seal a deal with a group led by Western Digital, which has jointly invested in Toshiba's Yokkaichi flash memory plant in central Japan. It now wants to become a minority investor in the business, part of a group that also includes Apple. Apple apparently said it worries about pricing. NAND flash consumption has exploded over the last 5 years. Citigroup Inc. lifted their price target on shares of Western Digital Corporation from $110.00 to $115.00 and gave the company a buy rating in a research report on Monday, May 1st.

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