Bain-led consortium ups bid for Toshiba Memory Corp to $22.3bn

Western Digital challenged by Toshiba over fears its bid will attract anti-trust investigations

The consortium led by Bain Capital has increased its bid for Toshiba Memory Corporation in the long-running auction of the Japanese conglomerate's memory chip and NAND flash storage business.

It comes after a rival group led by Western Digital, which enjoys 50/50 ownership of Toshiba Memory Corp factories in Japan, appeared to have taken pole position in the race to acquire the highly rated company.

The Bain-led consortium also includes SK Hynix, the South Korean chip maker. Its upped bid of around ¥2.4 trillion ($22.3bn) compares with an original bid of about ¥1.9 trillion on the table from Western Digital, which following its $19bn acquisition of SanDisk last year may well be financially stretched to match the offer on the table from Bain.

According to Reuters, the Western Digital-led consortium has also increased its bid, but now needs to allay Toshiba's fears that its bid could be embroiled in an investigation with anti-trust authorities, either in Japan or elsewhere, given its dominance of the hard-disk storage market and its ownership of SanDisk.

In addition to the bids led by Bain Capital and Western Digital, a third bidding consortium, led by Foxconn, is also in the running. It's bid, though, is likely to be rejected on the grounds of Foxconn's close connections with China, which would almost certainly entail an investigation by the Japanese government before it is allowed to go ahead.

According to Reuters, the Bain bid would give the venture capital firm 49.9 per cent of initial voting rights in the business, while Toshiba would retain a 40 per cent stake. Sundry Japanese companies would hold 40.1 per cent, enabling the consortium to argue that Toshiba Memory Corporation remains in Japanese hands.

SK Hynix is providing finance, but it is possible that this could be turned into a share stake at a later date, after the deal is approved by the Japanese government.

Apple, meanwhile, is lurking in the background of all three consortia, using its vast cash reserves to help fund the winning bidder.

Given the supply pinch of memory and NAND flash chips, Apple is keen to ensure it is on the winning side in order to ensure an uninterrupted supply for its popular smartphones, tablet computers, laptops and desktop computers.