Japan’s cash-strapped Toshiba Corp. picked a government-led sundry and multinational group comprising of investors and even rivaling South Korean chipmaker SK Hynix Inc. as the preferred bidder for the world’s second biggest NAND flash business.

Toshiba after a board of directors meeting on Wednesday morning said it tapped a group led by government-backed Innovation Network of Corp. of Japan, Development Bank of Japan, U.S private equity Bain Capital and SK Hynix for exclusive talks for its lucrative flash memory business.

The consortium presented the “best proposal…in respect to certainty of closing, retention of employees, and maintenance of sensitive technology within Japan,” said Toshiba in a press release on the closely-watched technology deal.

The consortium reportedly proposed 2 trillion yen ($18 billion) or more for Toshiba’s memory business. Innovation Network of Corp. of Japan and Development Bank of Japan are responsible for 54 percent of the payment and will be given the control over the entity accordingly. Simply put, Toshiba’s memory business will be nationalized under Japanese government while Korean and U.S partners take a fringy part of the business, market experts said.

The decision is hardly surprising, given intense pressure from the government to prevent the ever-burgeoning memory business and technology from ending up in foreign hands.

A clean closure of the deal however is uncertain as Western Digital, Toshiba’s long-time partner in NAND business which has filed for a court injunction to stop the sale, reiterated after the announcement that Toshiba was breaching their joint-venture agreement.

To circumvent antitrust regulations as it is in direct rivalry in flash chip making, SK Hynix will be lending 300 billion yen to the special purpose company established for acquiring Toshiba’s memory business instead of taking an equity stake in it.

According to market data provider IHS, SK Hynix commands a 10.1 percent share in global NAND flash memory market as of last year while Toshiba has a 19.6 percent, trailing market-dominant Samsung Electronics with a 35.4 percent share.

Any benefit to SK Hynix however is questionable due to its limited share in the complex investment group. Shares of SK Hynix finished Wednesday at 64,800 won ($56.67), up 800 won or 1.25 percent from the previous session

Toshiba plans to complete sale agreement with the consortium by June 28 and finalize the deal by March 2018.

By Hwang Hyung-gyu and Jung Wook

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