Toshiba to announce preferred bidder for semiconductor unit next week

Deal believed to be down to either Foxconn or Western Digital

Toshiba is preparing to announce its preferred bidder for its chip division, which will see the company divest itself of its 50 per cent stake in its highly prized NAND flash development and manufacturing unit.

The unit runs a factory in Japan in partnership with disk-drive maker Western Digital, which became Toshiba's partner last year when it completed the acquisition of SanDisk.

The announcement is set for June 15th, with the reserve price for the company pinned at $18bn.

The two preferred bidders have been narrowed down to original frontrunner Foxconn, and Western Digital.

Although the latter seems the obvious choice, it has come under fire for trying to obstruct the open bidding process, arguing that it should have a say in who its new trade partner will be, and generally finding fault with any bid that was not its own.

The company said in a letter seen by Reuters, that "Toshiba encourages Western Digital to redirect the considerable efforts that it has put into disrupting Toshiba's sale process into more productive channels".

For its part, Western Digital has warned that to sell without its consent would "clearly violate the transfer restrictions in the joint venture agreements."

Toshiba is teetering on the brink of outright collapse after a bungled attempt to enter the nuclear business, which resulted in the bankruptcy of Westinghouse.

Toshiba failed twice this year to release its quarterly earnings before eventually taking the almost unprecedented step of releasing them without sign off from the accountants.

Western Digital says it is "best positioned to assist Toshiba in addressing its challenges and advancing its legacy of technological innovation in Japan". But for cash-strapped Toshiba, the larger Foxconn offer will no doubt be vastly more appealing.

Additionally, Western Digital may come up against anti-trust issues given its already commanding position in the NAND flash market, while the Japanese government is also keeping a watchful eye over the process. It will block any deal that might see high tech know-how transferred to China.

Meanwhile, Toshiba shares rose six per cent on the news that a decision was close, but still remains significantly lower than last December when the company first revealed that its nuclear ambitions had blown up.