Toshiba Corp. has chosen a consortium formed by Japanese, South Korean and U.S. investors as the preferred bidder for the sale of its flash memory business, the company said Wednesday, in a move that appears to have prioritized government concerns.

“Toshiba has determined that the consortium has presented the best proposal, not only in terms of valuation, but also in respect to certainty of closing, retention of employees, and maintenance of sensitive technology within Japan,” Toshiba said in a statement.

The consortium, which bid ¥2 trillion, was formed by Innovation Network Corp. of Japan and the Development Bank of Japan — both of which are state-backed bodies — and Bain Capital Private Equity LP, a U.S. investment fund. Toshiba said SK Hynix Inc., a South Korean flash memory manufacturer, is also part of the consortium.

Hon Hai Precision Industry, a Taiwan-based electronics assembly behemoth, was among other overseas firms interested in Toshiba’s prized flash memory business, the value of which Toshiba has said exceeds ¥2 trillion. Hon Hai reportedly offered about ¥3 trillion.

But Hon Hai’s offer might have unsettled government officials as they eyed the risk of Toshiba technology being leaked to China, where Hon Hai runs factories.

Industry minister Hiroshige Seko welcomed Toshiba’s decision on the sale, according to the Nikkei business daily. He was quoted as saying that protecting Toshiba’s technology from going overseas, retaining workers and promoting innovation were government conditions, adding that these are met to a certain extent by the consortium.

Cash-strapped Toshiba said it aims to reach a formal decision on the bid for Toshiba Memory Corp. by next Wednesday, when it holds an annual shareholders meeting.

But some analysts said it remains unclear whether the negotiation and sale process will go smoothly.

“It could still take a while depending on how Western Digital reacts. Also, if SK Hynix is part of the consortium, antitrust assessments will take place. So, I imagine there will be some twists and turns,” said an analyst who declined to be named because Toshiba is a sensitive subject.

Toshiba has the second-largest share in the flash memory market, while SK Hynix is ranked fifth.

The analyst said Toshiba’s biggest concern should be Western Digital Corp., a joint investor in a flash memory factory in Mie Prefecture with Toshiba. The U.S. firm has been trying to block the sale of the unit to other buyers. In May, Western Digital took the matter to the International Court of Arbitration at the International Chamber of Commerce. It also sought an injunction last week from a court in California to block the sale.

On Wednesday, Western Digital said in a statement that it is exploring legal avenues because Toshiba “continues to ignore” claims by the U.S. firm.

Takao Matsuzaka, a credit analyst at Daiwa Securities, said it would not be very hard to reach an agreement with the consortium by Wednesday, when the shareholders meeting will be held.

But even if Toshiba formally decides the bidder, Western Digital is expected to keep blocking the sale. Thus, Toshiba will continue to face the problem and will have to find a way to settle the issues with Western Digital, said Matsuzaka.

“The situation will have to be more carefully observed if an injunction demand is issued by an overseas court during the sale procedure,” he said.

Although Western Digital is a risk factor for Toshiba, analysts said they are likely to reach a compromise eventually because allowing the situation to deteriorate further would be detrimental to them both.

Western Digital wants to maintain a competitive focus on flash memory, but its ability to do so will be hampered if the arrangement with Toshiba cannot be settled.

Toshiba desperately needs cash to clear a negative net worth of about ¥540 billion derived from Westinghouse Electric Co., its U.S. nuclear unit. The internationally known Japanese firm will be delisted from the Tokyo Stock Exchange if it ends this fiscal year with a negative net worth.

Last month, the firm disclosed unaudited fiscal 2016 results and reported that its net loss would reach a massive ¥950 billion due to the crisis at Westinghouse, which filed for Chapter 11 bankruptcy protection after facing massive cost overruns from construction delays for AP1000 reactors in Georgia and South Carolina.

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