Apple Inc. is playing the role of kingmaker in the contentious battle for Toshiba Corp’s memory chips business. The iPhone maker is in talks to provide about $3 billion in capital for Bain Capital’s bid for the unit, adding to financial support from Dell Inc, Seagate Technology Plc and SK Hynix Inc, according to people familiar with the matter. That support convinced Toshiba to sign a memorandum of understanding with Bain and work toward a final agreement this month, said the people, asking not to be identified because the matter isn’t public. Apple plans to take an equity stake alongside Bain, they said. If the agreement is completed, it may exceed Apple’s largest deal ever, the $3 billion acquisition of Beats Electronics LLC.
The Cupertino, California-based company is helping swing the deal away from Western Digital Corp, one of Apple’s own suppliers that tried to buy the chips unit with KKR & Co Apple’s money will help fill a gap left when state-backed Innovation Network Corp. of Japan and Development Bank of Japan decided to pull back from the Bain bid in the face of litigation from Western Digital. Apple spokesman Josh Rosenstock declined to comment.
Toshiba has been in negotiations for months to sell off its chips business and pay for a disastrous move into the US 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 veto rights in any sale because of its partnership with Toshiba in the chips business. The Japanese company disputes that and sued Western Digital for more than $1 billion for interfering in the auction.
Apple has opposed Western Digital’s bid and decided to back Bain because of the business’s strategic importance, the people said. Apple depends on flash memory from Toshiba in its iPhones and iPods, and wants a continued supply so it’s not dependent on rival Samsung Electronics. The iPhone maker’s largest deal to date was the Beats acquisition in 2014. Toshiba said Thursday it “regrets” that Western Digital is persistently overstating its rights and that the Japanese company is committed to completing the chip sale by March.
Meanwhile, the legal dispute is progressing toward a resolution, with a three-member arbitration panel likely to be assembled by the end of the month, according to people familiar with the matter. Arbitration is expected to take no more than 6 or 7 months, which means a decision is likely before March, they said.
Toshiba selected a Bain-backed group as its preferred bidder in the chip sale in June, as the Tokyo-based company sought to close the deal that month. At the time, the Bain consortium offered about 2.1 trillion yen ($19.1 billion) and included INCJ and DBJ. The effort was hampered by opposition from Western Digital, which solicited support from Japanese government officials and banks.