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(Image courtesy of Toshiba).

Toshiba Sits Down More Seriously with Bain Capital

Toshiba said that it favored a group led by American investment firm Bain Capital in the sale of its memory chip business. The group could pay somewhere around $18 billion, which Toshiba needs to financially bandage its bankrupt nuclear power unit.

Toshiba, the world’s second largest maker of memory chips, said that it hopes to close the deal by the end of this month. But on Tuesday it also expressed willingness to talk with bidders other than Bain, which has allied with two funds controlled by the Japanese government. Foxconn and Western Digital are also bidding.

In June, Bain appeared to be the frontrunner for Toshiba’s business, which sells NAND memory chips for servers and smartphones. Bain briefly lost its preferred status last month when Western Digital seemed close to striking a deal. But after the Japanese conglomerate missed an internal deadline to sell the business, throwing the auction into uncertainty.

That changed on Tuesday when Toshiba issued an update on the sale. “Toshiba’s board of directors has determined to continue negotiations with the Bain-led consortium on the basis of this new proposal, and the company will work to expedite the conclusion of a stock purchase agreement,” the company said in a statement.

Western Digital, which shares ownership of Toshiba’s factory operations in the city of Yokkaichi, immediately objected. The company, which has allied with the American private equity firm Kohlberg Kravis Roberts, argues that the sale of Toshiba’s chip unit requires its approval.

“We are disappointed that Toshiba would take this action despite Western Digital's tireless efforts to reach a resolution that is in the best interests of all stakeholders,” the firm said in a statement. “Our goal has been — and remains — to reach a mutually beneficial outcome that satisfies the needs of Toshiba and its stakeholders.”

The sale has been complicated for months. Toshiba has set several internal deadlines to strike a final deal after legal pressure from Western Digital slowed down the auction in June. After learning that it was not Toshiba’s first choice Wednesday, Western Digital again threatened to take Toshiba to court.

“Toshiba intends to reach a definitive agreement that fully meets our objects at the earliest possible date,” said Yasuo Naruke, Toshiba’s senior executive vice president, in a statement. The Japanese company says that the buyer must not only submit a rich bid but also be capable of nurturing the business.

“The memory business is highly time sensitive,” Naruke said.

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