KKR Said to Be Wooing Apple to Switch Sides in Toshiba Bid

(Bloomberg) -- KKR & Co. is trying to persuade Apple Inc. to switch sides and join the private equity firm in a bid for Toshiba Corp.’s flash memory chip business, according to a person familiar with the discussions.

The pitch comes just days after the Japanese company said its board agreed to sell the unit to another group, led by Bain Capital, that included the iPhone maker, Dell Inc., SK Hynix Inc. and Seagate Technology Plc for for 2 trillion yen ($18 billion). Apple has yet to agree to final terms with Bain and is negotiating the volume of chips to be supplied, another person familiar with the matter has said.

Switching to the KKR group from the Bain group would require Apple to become more comfortable with Western Digital Corp.’s role in its manufacturing joint venture partnership with Toshiba after the acquisition and that may still prove a sticking point, said the person, who asked not to be identified because the matter is private.

Toshiba shares were little changed in Tokyo trading.

Apple, as the largest consumer of the type of chips that Toshiba produces, is aiming to get the best deal on price and volume for a key component and has a vested interest in keeping the market competitive. The compact chips are essential for its iPhones and iPods, storing every photo, video clip and animoji. Apple previously opposed a bid by KKR and Western Digital for the Toshiba unit in part because it would concentrate power within the chip industry.

If KKR is able to persuade Apple to switch sides at the last-minute it could upset a deal that had looked like it would end months of twists and turns in finding a buyer for Toshiba’s prized asset. The Japanese company needs cash to shore up a balance sheet destroyed by a failed foray into the nuclear power equipment industry and is facing a deadline in March to complete a deal or be delisted from the Tokyo Stock Exchange.

Apple, Toshiba, Western Digital and KKR declined to comment. Bain didn’t immediately respond to a request for comment.

A switch of allegiance may also provide a lifeline to Western Digital, which has opposed a deal that includes competitors. The company is trying to guarantee a future for its joint-venture manufacturing partnership with Toshiba. The U.S. company’s lawsuits and attempts to influence the sale have caused a rift with Toshiba and provoked its Japanese partner into trying to lock it out of new, more efficient manufacturing that’s being planned.

Western Digital withdrew from the KKR bidding group to allay concerns in Japan over the U.S. company taking an ownership stake and is now focused on renegotiating the joint venture. The company has filed for arbitration in the U.S. and argues it has rights in any sale.

--With assistance from Pavel Alpeyev

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net, Ian King in San Francisco at ianking@bloomberg.net.

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Michael Hytha