Toshiba said to aim for chip deal with Bain by Wednesday

Tokyo, Japan - Toshiba Corp is aiming to finalise a deal to sell its memory chips business to a group led by Bain Capital at a board meeting on Wednesday, despite opposition from partner Western Digital Corp, according to people familiar with the matter.

Toshiba’s effort faces resistance because the Bain group now includes several Western Digital competitors, including Seagate Technology Plc, Kingston Technology Co and SK Hynix Inc, said the people, asking not to be identified. Western Digital partnered with KKR & Co to try to buy the chips business, but Toshiba opted for the Bain bid, signing a memorandum of understanding as they work toward a final agreement.

Toshiba has been in talks for months to sell its chips business and pay for a disastrous move into the US nuclear sector. The company needs to raise the money by March to avoid seeing its shares delisted from the Tokyo Stock Exchange. The auction has been complicated by legal action from Western Digital, which has argued it should have veto rights in any sale because of its partnership with Toshiba in the chips business. The Japanese company disputes that and sued Western Digital for more than US$1bn for inter- fering in the auction.

Toshiba’s board might not be able to reach a final deal this week and if not would revisit the issue the following week, said one of the people. Kaori Hiraki, a spokeswoman for Toshiba, said on Sunday she couldn’t comment on the details of the deal.

The KKR group, backed by Western Digital, was on the verge of winning the auction just weeks ago with support from Japan’s powerful Ministry of Economy, Trade and Industry, people familiar with the matter said at the time. Yasuo Naruke, head of the chips business, and several other top executives resisted the Western Digital proposal, the people said.

Apple Inc helped swing momentum away from Western Digital by backing Bain’s effort. The iPhone maker is in talks to provide about US$3bn in capital for the bid. If the agreement is completed, it may exceed Apple’s largest deal, the US$3bn acquisition of Beats Electronics LLC.

John Connaughton, Bain’s comanaging partner, confirmed the firm is working with Apple and Dell Inc, without disclosing details of the negotiations.

“A lot of people that want Toshiba Memory to be an independent company,” he said in an interview on Bloomberg Television last week.

“The management is really aligned with us and supports us because we will be that party that retains that independence,” Connaughton added.

Bain issued a statement identifying Seagate and Kingston as partners as well.