Japan government-led group tells Toshiba to fix chip spat with Western Digital: sources | Reuters

By Taro Fuse and Se Young Lee

TOKYO/SEOUL A Japanese government-led consortium has told Toshiba Corp it needs to resolve its legal dispute with Western Digital Corp before it will invest in the firm’s chip unit, sources briefed on the matter said.

The consortium is seen as one of the strongest suitors for the unit – the world’s No. 2 producer of NAND chips – as it would automatically have the government’s stamp of approval, but it is worried about legal risks if the spat is not settled, the sources said.

The group includes a state-backed fund, the Innovation Network Corp of Japan (INCJ), the Development Bank of Japan (DBJ), as well as U.S. private equity firm Bain Capital. South Korean chipmaker SK Hynix Inc and the core banking unit of the Mitsubishi UFJ Financial Group Inc are set to provide financing.

Their bid is expected to exceed the minimum of 2 trillion yen ($18 billion) sought by Toshiba, one of the sources said.

Western Digital, which jointly operates Toshiba’s main chip plant, has sought a court injunction to prevent its partner from selling its chip business without the U.S. firm’s consent.

But Toshiba wants to complete the deal as quickly as possible to help cover billions of dollars in cost overruns at its now-bankrupt Westinghouse nuclear unit and to dig itself out negative shareholders’ equity that could lead to a delisting.

The conglomerate had set its sights on choosing a preferred bidder at a board meeting on Wednesday, separate sources familiar with the matter said. It wants to reach a definitive agreement by June 28, the day of its annual shareholders meeting.

But the sources added that the condition set by the government-led group could prompt Toshiba to postpone the vote.

The sources declined to be identified as discussions concerning the sale were confidential. INCJ, DBJ and SK Hynix and MUFG declined to comment. A representative for Bain was not immediately available…

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