TOKYO — The chief executives of Toshiba and U.S. chipmaking partner Western Digital agreed Wednesday to discuss the Japanese conglomerate’s sale of a majority stake in its flash memory unit, which Western Digital has opposed selling to any buyer but itself.

Toshiba President Satoshi Tsunakawa and Western Digital CEO Steve Milligan met here Wednesday afternoon.

Both sides appear to have moved to end the standoff over the sale in the interest of preserving their joint production arrangement in Japan.

Western Digital has offered to buy Toshiba Memory, which was recently spun off from the Japanese parent, but its offer is lower than other bids at this point. Toshiba has sought at least 2 trillion yen ($17.8 billion) from the sale.

Given their chipmaking partnership at the Yokkaichi plant in Japan, Toshiba would be expected to proceed with negotiations on a sale to Western Digital if it can secure an adequate price. If not, Toshiba may continue considering bids from other parties. 

Western Digital had demanded exclusive negotiating rights. Two rounds of bidding, which Western Digital sought to stop, have already taken place.

About-face on collateral

Toshiba opened up to the possibility of a sale to Western Digital after the latter indicated prior to Wednesday’s meeting that it would drop its opposition to Toshiba Memory shares being used as collateral for a Toshiba credit line.

Cash-strapped Toshiba responded to this concession by taking up consideration of Western Digital’s offer. Tsunakawa appears to have asked Milligan for more effort on the price and other terms.

Key Toshiba lenders have set up a credit line of nearly 700 billion yen. But the Tokyo-based company has been unable to access this money because of Western Digital’s objection to using the shares as collateral.

Worried that the rift may lead to a cash crunch at Toshiba, lenders Sumitomo Mitsui Banking, Mizuho Bank and Sumitomo Mitsui Trust Bank appealed directly to Western Digital to change its mind. The American company relented, apparently out of concern that a prolonged dispute could hurt the joint flash memory operations at Yokkaichi in Mie Prefecture.

In order to emerge from negative net worth by the end of March, Toshiba needs to sell the business quickly. But Western Digital’s May 15 filing with the International Chamber of Commerce’s International Court of Arbitration to block the sale set in motion what could be a lengthy legal process. This added to the pressure on Toshiba to negotiate with the U.S. chipmaker.

For Toshiba’s lenders, completing the sale and replenishing Toshiba’s capital by the end of March 2018 is “a non-negotiable red line,” in the words of a senior executive at one of the banks. Western Digital’s arbitration filing posed an unexpected complication for them, too. Creditors will meet with Toshiba on Thursday for an update on the bidding for Toshiba Memory.

A Western Digital acquisition of Toshiba Memory would have to clear antitrust reviews in multiple jurisdictions — a potentially difficult process given the market share considerations associated with combining two leading chipmakers.