South Korea’s SK Hynix finds itself as an odd out in the multinational quest for Toshiba’s flash memory business as the Japanese maker unexpectedly ditched its earlier choice of a Japanese-U.S.-Korean group to enter fresh talks with another led by its longstanding business partner Western Digital.

The Nihon Keizai Shimbun reported on Wednesday the American hard-drive manufacturer launched due diligence on the memory unit and began negotiations with a goal of signing a deal as early as next week.

Market watchers say the game is completely leaning towards the Western Digital camp amid little progress in talks between Toshiba and the American-Japanese-South Korean consortium, the original preferred bidder selected in June.

In its final round of negotiations, Western Digital that leads a consortium including the public-private Innovation Network Corp. of Japan, Kohlberg Kravis Roberts of the U.S. and the state-backed Development Bank of Japan has tendered a roughly 1.9 trillion yen ($17.3 billion) bid for Toshiba Memory. Japan’s state-sponsored Innovation Network Corp. jumped over to Western Digital`s camp, turning back against its former consortium partners Bain Capital and SK Hynix. There had been voices of concern in Japan on antitrust issues and technology leak as SK Hynix also makes flash memory.

Western Digital would contribute hundreds of billions of yen in funding without initially receiving voting rights, similar to the proposal submitted by SK Hynix. Toshiba plans to take a stake of less than 20 percent after the deal clears antitrust reviews.

Once employee conditions and other details are agreed upon, representatives from Western Digital including chief executive Stephen Milligan will arrive in Japan this week to sign a final deal and drop a lawsuit against Toshiba. Toshiba’s board will also prep to okay the deal upon the agreement. Western Digital that has been running a joint-venture memory business with Toshiba filed a lawsuit against its Japanese partner on breach of trust to block the sale to a third party.

SK Group that holds the preferred bidder position did not give up hope, saying “time is on our side although there is little we can do at this point of time.”

At 1:30 p.m., shares of SK Hynix were up 0.4 percent at 68,300 won ($60.6)

SK Telecom CEO Park Jung-ho who is supervising the acquisition told reporters that "the M&A battle for Toshiba is a long-haul process and a race against time,” suggesting that his company will not respond aggressively to the current situation, like offering a higher price.

It seems an agreement between Toshiba and Western Digital will be reached any time soon but it will not be easy to settle their big differences, he believes.

By Hwang Hyung-gyu and Jung Wook

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]