Toshiba Sells Chip Unit to Bain

Toshiba Corp.’s board agreed to sell its flash memory chip unit to a group led by Bain Capital for 2 trillion yen ($18 billion), taking an important step toward ending a contentious bidding process that has stretched over eight months.

The Bain consortium includes backing from Japanese and overseas companies, including Toshiba, which will reinvest 350.5 billion yen, the company said in a statement. Apple Inc., Dell Inc., SK Hynix Inc. and Japan’s Hoya Corp., will provide financial support, according to people familiar with the situation. The iPhone maker played a crucial role in swinging momentum in the tumultuous auction to the Bain offer.

Apple is interested in the chip unit because of the strategic importance of flash memory. The compact chips are essential for its iPhones and iPods, storing every photo, video clip and animoji. Only a handful of companies make the highest-end technology and the dominant player is Samsung Electronics Co., the world’s second-largest chipmaker, which controls about 40 percent of the market for flash memory. Investing in the Toshiba unit may help keep the market for the vital chip component competitive, while any further strengthening of Samsung’s position may toughen price negotiations for companies such as Apple, which compete with it in other areas.

Bain, meanwhile, is betting on huge demand and rising prices for memory chips in a market with only a handful of players that can afford to build plants.

Toshiba is selling off its chips business to pay for billions of dollars in losses in its U.S. nuclear business. The company needs to raise the money by March to avoid seeing its shares delisted from the Tokyo Stock Exchange. Toshiba expects the deal to close by March 31 and aims to restore a positive net worth by the end of the fiscal year, according to the statement.

The auction has been complicated by legal action from Western Digital Corp., 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.

Western Digital has also sued in court and filed for arbitration in California to make its case. As part of Wednesday’s agreement, Bain agreed to complete a deal regardless of the legal challenges. Shares of Western Digital fell 4 percent in the U.S. Wednesday.