Bain and INCJ Said to Offer $19 Billion for Toshiba Chip Unit

A group led by Bain Capital and Japanese investors has offered about 2.1 trillion yen ($19 billion) for Toshiba’s semiconductor division, emerging as a leading bidder in the hotly contested auction, according to Bloomberg, citing people familiar with the matter.

The U.S. private equity firm has the backing of state-supported Innovation Network Corp. of Japan and Development Bank of Japan, seen as essential in winning government approval for an acquisition. Bain is also in talks with KKR, which led a rival bid, to join the consortium, one of the people said.

The other leading contender now is U.S. chipmaker Broadcom Ltd., which made an offer of about 2.2 trillion yen. Toshiba’s board met Thursday to discuss the bids and aims to pick a winner by the end of June. The auction has been complicated by objections from  Western Digital, which jointly owns certain chip assets with Toshiba. The U.S. company has sought to prevent the business falling into the hands of rivals and opposed Broadcom in particular.

Under the Bain bid, INCJ will contribute 300 billion yen in equity, while DBJ will contribute another 300 billion yen in preferred shares and equity, the person said. South Korean chipmaker SK Hynix will provide only loans to avoid antitrust hurdles and contribute about half of the bidding money, another person familiar with the matter said. Taiwan’s Hon Hai has also submitted a bid for the chips unit, but Toshiba is reluctant to sell to the company because of its close ties to China. Founder Terry Gou has complained about the unfair process and vowed to press his case.

Western Digital, which initially sought a controlling stake, hasn’t been able to match the offers of rival bidders and instead resorted to legal action to influence the process. Its aggressive legal maneuvering has increasingly alienated the Japanese government, which initially supported the U.S. company’s involvement. Western Digital filed for an injunction to block the sale this week, requesting the auction be put on hold while it pursues arbitration claims against Toshiba.