Apple joins last-minute bid for Toshiba’s chip unit

Apple Inc. is wading into the middle of the battle for Toshiba Corp.’s memory chips business.

The iPhone maker is in talks with Bain Capital to bid for the Tokyo-based company’s unit, in competition with a group that includes KKR & Co. and Western Digital Corp., according to people familiar with the matter. Bain had previously submitted a 2.1 trillion yen ($19 billion) bid with another group of backers that included state-backed Innovation Network Corp. of Japan and Development Bank of Japan.

Apple depends on flash memory from Toshiba in its iPhones and iPods, and wants a continued supply from the Japanese company so it’s not dependent on rival Samsung Electronics Co. “There are supply shortages of that type of memory,” Michael Walkley, an analyst with Canaccord Genuity, said by phone. “They’re always looking to work closely with key suppliers and lock in long-term supply agreements.”

Apple gained less than 1 percent to $163.19 at 10:07 a.m. in New York while Toshiba’s American depository receipts were up 1.5 percent to $17.65.

Toshiba has been in negotiations for months to sell off its chips business and pay for a disastrous move into the U.S. nuclear business. 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 a say in any sale because of its partnership with Toshiba in the chips business.

In recent weeks, Japan’s powerful Ministry of Economy, Trade and Industry has encouraged Toshiba to accept the offer from the Western Digital consortium, the people said, in an effort to end the litigation and reach a deal quickly. Top Toshiba executives and its deal advisers are resisting the current offer, arguing it doesn’t do enough to protect the interests of the chips unit or the parent, the people said. Yasuo Naruke, head of the chips business, is an outspoken critic of the Western Digital proposal, the people said, while the METI bureau involved in the talks is led by Tatsuya Terazawa.

An email and voicemail message to an Apple spokesperson requesting comment were not immediately returned. Kaori Hiraki, Toshiba’s spokeswoman, declined to comment on details of the deal negotiations.

Japanese broadcaster NHK previously reported Apple’s talks with Bain.

The Western Digital consortium is offering about 2 trillion yen ($18 billion), less than the original Bain bid, a person familiar with the matter has said. Western Digital would loan money for the initial purchase with rights to take a minority equity stake in the future, the people said.

In the past week, Toshiba’s banks have stepped up pressure to reach final terms by Thursday, so that it can complete the sale by March, people familiar with the matter have said. Western Digital Chief Executive Officer Steve Milligan also returned to Japan to work on the deal, they said. But Toshiba and Western Digital remain at odds over several points., and reaching final terms by Thursday looks close to impossible, said one of the people.

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