Apple part of group seeking to buy Toshiba's memory chip business for $18 billion

Posted: , by Alan Friedman

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This past April we told you that Apple, along with other major tech firms, was interested in purchasing Toshiba's memory chip business. Two weeks later, there was talk about Apple and Foxconn teaming up to make the purchase. This report came after after the contract manufacturer was rumored to have made an $18 billion bid for the company all by itself. Now, talk about a deal involving Apple is warming up again as Western Digital's own Thursday deadline to reach a deal with Toshiba ends today.

Bain Capital is part of a consortium that just lobbed in an $18 billion bid for what is the second largest producer of NAND chips on the planet. To better support their bid and add deep pockets to their financial prospects, Bain is adding Apple to its group. The tech titan has its own reasons for joining the group, which we will discuss later in the story. While Apple does have a cash hoard valued at over $250 billion, the largest deal it ever made was the $3 billion purchase of Beats Audio back in May 2014.

Samsung is the current global leader in producing NAND chips
Toshiba is said to need the money to cover the red-ink overflowing from its nuclear business in the U.S. known as Westinghouse. Meanwhile, a deal like this fits Apple's MO when it comes to manufacturing its devices. The company likes to source parts from multiple suppliers to guarantee a steady stream of components, and it also allows Apple to play one company against another in an effort to lower the price of key parts. It also helps the company lower its reliance on rival Samsung when it comes to iPhone suppliers. 

As far as the $18 billion is structured, the total package from Bain's consortium is valued at $2.2 trillion yen ($18.2 billion USD to be precise). Bain, together with South Korean chip maker SK Hynix, will put in 1.1 trillion yen, or 55% of the cost. Apple will chip in 400 billion yen or 18% of the funds. 27% of the money raised for the deal is coming from Japanese banks that have pledged to invest 600 billion yen. Toshiba itself will put in 200 billion yen, or 9% of the deal's cost.

Western Digital's offer, which ends today if it is not accepted by Toshiba, is valued at 1.9 trillion yen and includes an investment from U.S. private equity firm KKR & Co LP. There is talk that Western Digital is trying to hike its bid to 2 trillion yen. If Western Digital wins the bidding, the company combined with Toshiba's memory chip division could come close to equaling the size of Samsung's leading memory chip business. That would give the Western Digital-Toshiba combination a chance to gain leverage in negotiations with Apple for NAND chips. Thus, Apple has a very good reason for getting involved in the consortium led by Bain.

source: Reuters

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