Western Digital is ready to buy Toshiba's chip manufacturing business

Western Digital is ready to buy Toshiba's chip manufacturing business

The MoU is non-binding so the company could still talk to others on the sale. In addition to being a competitive force in chips, Western Digital is also the world's largest manufacturer of disk drives, competing against Seagate Technology (STX).

Cash-strapped Japanese industrial giant Toshiba said Wednesday it had picked a US-led consortium as the leading candidate to buy its prized chip business in a deal reportedly worth some $18 billion. Toshiba has to raise at least $18 billion from the sale so it can escape negative shareholder equity and cover the billions of dollars in liabilities incurred by USA nuclear subsidiary Westinghouse.

However, if Western Digital remains a minority investor in the business, Apple, a top customer for Toshiba chips, is offering about 50 billion yen ($460 million) to a group including the United States firm to help finance a bid, one source said.

Western Digital shares were up 0.7%, near 88.05, during morning trading in the stock market today. Mizuho reiterated a buy rating on shares of Western Digital Corporation in a research report on Friday, May 19th.

Western Digital gained a stake in the Toshiba unit as a result of its $15.8 billion SanDisk acquisition. The Japanese company is looking to finalize the deal at a board meeting next week.

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Toshiba Corp. has once again chose to hold off on making a decision on the buyer of its chip unit at a board meeting as negotiations with a Western Digital Corp. -led group have stalled, sources close to the matter said Tuesday.

A number of other institutional investors and hedge funds also recently modified their holdings of the business.

On top of its earlier offer to buy Toshiba Memory Corp. for about ¥2 trillion, the SK Hynix consortium informed the Toshiba side of its readiness to shoulder several hundred billion yen in costs for the introduction of equipment to make cutting-edge memory chips, as well as for research and development, according to the sources.

Daryanani has an outperform rating on Western Digital and a price target of 115. The data storage provider reported $2.93 earnings per share (EPS) for the quarter, beating the consensus estimate of $2.51 by $0.42.

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