* Western Digital OK with no immediate majority stake
* Not clear if govt willing to ever cede majority control
* Consortium expected to be most favoured bidder for the
By Makiko Yamazaki and Taro Fuse
TOKYO, May 29 Western Digital Corp may
join a consortium of Japanese government money and KKR & Co LP
to bid for Toshiba Corp's chip unit, backing
away from an earlier demand for an immediate majority stake, two
sources familiar with the matter said.
The consortium is expected to be the favoured bidder for the
world's second biggest producer of NAND memory chips, as the
presence of state-backed fund, Innovation Network Corp of Japan
(INCJ), and the Development Bank of Japan (DBJ) will be taken as
as the government's stamp of approval.
The concession by Western Digital could be a turning point
in the hotly contested auction for unit, which Toshiba has
valued at at least 2 trillion yen ($18 billion). A successful
sale is critical to Toshiba's recovery after massive cost
overruns at nuclear unit Westinghouse plunged it into crisis.
Western Digital, which jointly operates Toshiba's main flash
memory chip plant, has sought arbitration, arguing that the
Japanese conglomerate is violating their joint venture contract
and demanding exclusive negotiating rights.
The California-based firm had told Toshiba it needed a stake
of at least 51 percent for the chip unit to be competitive but
it was not seen as a strong bidder after submitting one of the
lowest bids in the first round of offers, sources have said
The sources speaking on Monday said Western Digital is now
open to being a minority investor for the time being and plans
to increase its stake to more than half when INCJ and KKR seek
an exit from their investment.
But it is not clear whether the trade ministry would allow
such a move, they said, declining to be identified as they were
not authorised to speak to the media on the matter.
The ministry has insisted that the chip unit should not fall
under the control of a foreign manufacturer as semiconductors
are important from the standpoint of national security, the
Toshiba declined to comment on the specifics of the sale
process. Western Digital, KKR and DBJ also declined to comment.
A representative for the trade ministry was not immediately
available for comment. An INCJ spokeswoman said the fund would
not comment on speculation.
Other suitors for the chip business include U.S. chipmaker
Broadcom Ltd which has teamed up with private equity
firm Silver Lake, and Bain Capital which has partnered with
South Korean chipmaker SK Hynix, sources have said.
Taiwan's Foxconn, formally known as Hon Hai Precision
Industry Co Ltd, also formed a consortium with its
Japanese unit Sharp Corp to bid in the second round,
($1 = 111.3500 yen)
(Reporting by Taro Fuse and Makiko Yamazaki; Additional
reporting by Junko Fujita and Kentaro Hamada; Editing by Edwina