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Western Digital asks Apple to join bid for Toshiba chip unit

Kyodo

Western Digital Corp. is asking Apple Inc. to join its bid for Toshiba Corp.’s chip unit, sources said Wednesday, in an apparent effort to raise more cash for the purchase.

The Western Digital group is aiming to raise Toshiba’s ¥2 trillion ($18 billion) asking price for Toshiba Memory Corp.

Western Digital, a key member of the consortium, has proposed a reduction in its share of investment in an effort to speed up antitrust screenings in Japan and abroad, and it could even decide to make no investment, sources have said.

In return, Western Digital is demanding that it continue to play a key role in the chip plant it jointly operates with Toshiba in Mie Prefecture.

Western Digital is also asking Toshiba to review their joint venture terms in a way that better benefits the U.S. firm, including increasing the proportion of flash memory chips it can receive.

Toshiba held a meeting Wednesday to discuss the proposal. But Toshiba will also consider competing bids from a Japan-U.S.-South Korea consortium and another organized by Taiwanese tech giant Hon Hai Precision Industry Co., as caution remains over Western Digital’s attempt to seek management rights in the chip unit in the future.

Flash memory chips are used as a storage medium in smartphones, and are considered a core component by Apple. Last week, the Japan-U.S.-South Korean group, which Toshiba had initially picked as its preferred bidder, made a last-minute bid for the chip unit together with Apple.

The core members of the Western Digital group include the government-backed Innovation Network Corp. of Japan, the Development Bank of Japan and U.S. fund Kohlberg Kravis Roberts & Co.

The Western Digital group had initially offered to buy Toshiba Memory for a total of ¥1.9 trillion to ¥2 trillion, including ¥150 billion worth of bonds that are convertible into common shares.

The Japanese conglomerate is rushing to finalize the sale in order to raise funds that could cover huge losses from its now-bankrupt U.S. nuclear power unit, Westinghouse Electric Co. The losses have plunged the Japanese conglomerate into negative net worth, a situation it must fix by next March to avoid a forced delisting from the Tokyo Stock Exchange.

On Wednesday, Toshiba also said it will build a new production site for Toshiba Memory in Kitakami, Iwate Prefecture, in addition to its existing plant in Yokkaichi, Mie Prefecture.

Toshiba said it is aiming to start building new fabrication plants in Kitakami in 2018 with operations to begin in 2020. The firm said it plans to hold talks with Western Digital over whether the U.S. firm will make joint investments in the new site.