Western Digital emerges as unlikely favourite in Toshiba memory sale

Toshiba’s ongoing battle with Western Digital has taken an unexpected twist. Despite a bitter court battle between the two companies, Western Digital now looks favourites to acquire Toshiba’s valuable memory chip business. According to the Nikkei business daily report, Western Digital is now Toshiba’s preferred bidder after a previously mooted deal with private equity firm Bain Capital and SK Hynix looks to have hit the buffers.

In June, Toshiba picked a consortium including Japanese government-backed funds, private equity firm Bain Capital and South Korean chip maker SK Hynix as the preferred bidder for the prized unit. However, Western Digital’s multiple legal challenges have scuppered the deal. The subsequent legal battle between the two companies unnerved the state-backed funds, which demanded that Toshiba resolve the conflict before the sale.

And now it looks like Western Digital may get the win they wanted all along. The Nikkeisaid Toshiba CEO Satoshi Tsunakawa told lenders that it would focus on negotiating with Western Digital with the aim of agreeing to a deal by the end of the month. Western Digital is allegedly offering around 2 trillion yen ($18 billion) and would form an alliance with U.S. private equity firm KKR & Co as well as the two Japanese government funds that are part of the preferred bidder group.

Whether or not the two firms can put their very recent animosity behind them remains to be seen. But the markets are certainly hopeful with shares in Toshiba’s bankrupt U.S. nuclear business Westinghouse rising by 4.6 per cent to 316 yen by the end of morning trade as the report lifted hopes of an imminent deal. Toshiba is keen to close the sale by the end of the fiscal year in March to ensure it does not report negative net worth for a second year running.

Toshiba’s financial woes are largely connected to its failed nuclear unit Westinghouse. Acquired in 2006, an ill-advised purchase in 2015 has led to massive scandal and loses for its parent company. Last month Westinghouse filed for a Chapter 11 bankruptcy and Toshiba is attempting to split from the company. Since revealing its financial turmoil a number of investors have shown an interest in Toshiba’s technology businesses.

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