Toshiba under heightened pressure to find a closure of its sale of NAND chip business

Toshiba is now facing pressures from Apple Inc, which is demanding new terms on supply of chips in return for funding.

On Wednesday, SK Hynix Inc stated its board had approved its participation in a Bain Capital-led consortium that plans to purchase Toshiba Corp’s memory chip unit for $17.7 billion (2 trillion yen) .

As part of that deal, SK Hynix will invest 395 billion yen, part of which will be in convertible bonds that could allow it to take an equity stake of up to 15 percent in the future, said the company in a statement.

Last week, Toshiba agreed to sell its NAND chip business to the Bain-led consortium. The signing of the deal however has got delayed in the wake of Apple Inc, a member of the consortium, demanding new terms on supply of chips in return for funding, said sources familiar with the matter at hand.

Toshiba’s spokesman said it was aiming to sign the deal as soon as possible.

As per a source with knowledge of the deal, who however prefers the cover of anonymity given the sensitivity of the matter, said the deal is not expected to be signed on Wednesday.

As part of the deal, the Bain-led consortium will have a 49.9% stake in the company, Toshiba will have 40.2% while Japan’s Hoya Corp, a medical technology firm that also makes parts for chip devices, will have the remaining 9.9%.

Members of the Bain-led consortium, including Dell Inc, Apple, Seagate Technology Plc and Kingston Technology, will invest in the form of non-convertible preferred shares, said Toshiba’s spokesman.

For Toshiba it is critical that the deal closes by the end of March 2018, else it will be significantly effected by liabilities arising from its now bankrupt nuclear unit Westinghouse. It could also come under pressure to delist its stock from the Tokyo Stock Exchange.

The deal faces a legal challenge from Western Digital Corp, Toshiba’s chip venture partner and rejected suitor, which is seeking an injunction to block any deal that does not have its consent.

Toshiba has said the sale would improve its shareholders’ equity by $6.6 billion (740 billion yen).

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