Reports indicate that the Bain Capital-led consortium has revised its offer to acquire the chip unit of Toshiba after managing to rope in Apple. It is understood that the new offer is now worth approximately $18.2 billion. This comes amidst various sources saying that a deal between Western Digital and Toshiba was facing challenges as the self-imposed deadline nears. A consortium led by Western Digital and KKR & Co had earlier placed a bid worth less though speculation was rife that their offer would be raised.
Toshiba has been making efforts to sell its unit that makes flash memory and which is the second largest producer of NAND chips in the world in order to cover losses amounting to billions of dollars which were incurred by Westinghouse – its nuclear business in the United States which is now bankrupt.
The relationship between Japanese conglomerate and Western Digital, which also doubles up as a joint venture partner in Toshiba’s chip business, has experienced rocky periods since the auction process began. This has resulted in a situation where preference was given to other bidders. Western Digital has also started legal action and this poses a threat to any deal that the U.S. firm has not consented to.
With Apple now a part of the bidding, the iPhone maker stands to improve its position with regards to the supply chain since the Cupertino, California-based tech giant heavily depends on Samsung though it also purchases memory chips from other vendors. In order to ensure that prices remain competitive, Apple needs to have as many suppliers of chips operating as possible. When Western Digital and Toshiba are put together their chip business is almost equal to the size of Samsung’s chip unit and such as a combination would have more power when negotiating with Apple.
“Apple is so big they need to multi-source,” Frank Gillett, an analyst with research outfit Forrester, said.
Previously a consortium led by Bain Capital had been selected as the preferred bidder by Toshiba. The talks however lapsed when Japanese government investors in the consortium grew cold feet owing to the legal risk that demands made by Western Digital pose. Bain’s new proposal is, however, different since the investors that are backed by the state such as Development Bank of Japan and Innovation Network of Japan will be invited to invest only once an agreement has been reached with Western Digital.