Apple Is Entering the Fervor Around Toshiba's $18 Billion Chip Sale

They failed to clinch a deal by end-August as planned, however, and Toshiba said on Thursday that it would continue to talk to the Western Digital consortium as well as two other suitors - groups led by Bain Capital and by Taiwan's Foxconn (2317.TW).

The consortium that includes Western Digital appeared to be close to a deal. A representative for Western Digital said she could not immediately comment.

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.

The embattled Japanese conglomerate has put its chip unit, - worth between $17 billion to $18 billion, up for sale as it scrambles to cover liabilities at its bankrupt US nuclear unit.

Toshiba plans to pit the consortiums against each other to obtain more concessions from Western Digital, the sources said. Yasuo Naruke, corporate senior vice president of Toshiba, and senior Toshiba Memory officials who were at the forefront of the buyout negotiations, found Western Digital's move "extremely obnoxious" and "harbored a sense of distrust in Western Digital", according to a senior bank official. In an effort to stay afloat, the company is selling off its profitable NAND manufacturing arm, which is the world's second largest manufacturer of flash chips.

Toshiba Corp said late Aug 30 that it is continuing in talks with three different groups of potential buyers for Toshiba Memory Corp. Before coming to the table with the Western Digital camp, Toshiba in June had made a decision to prioritize talks with a team of Japanese, South Korean and American players led by Bain Capital.

"As the NAND flash memory market has been facing supply shortages, [joining the bid] could be a good strategy for Apple to secure a stable supply chain for chips", said Lee Seung-woo, a research fellow from Eugene Investment & Securities. He said Apple needed to keep as many chip suppliers as possible in the market to keep prices competitive. -South Korean consortium as the preferred bidder for the unit, but Toshiba later switched to the Western Digital-led group as negotiations with the consortium stalled.

The sources declined to be identified as talks concerning the auction were private. 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.

"Additionally, Western Digital will not have any ability to interfere in the management or operations of TMC, and we have no desire or expectations to the contrary", he said.

Toshiba wants to reach a deal soon and it is not clear if it will give serious consideration to Bain's new proposal.

If the deal is not completed by that time and Toshiba can not procures funds through other means, its debts will exceed its assets for two consecutive years, and its stock will be delisted from the Tokyo Stock Exchange.

Vanessa Coleman

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