According to the latest report, the iconic iPhone manufacturer Apple Inc (NASDAQ: AAPL) is planning to invest $3 billion in Bain Capital, which is leading the bid to acquire Toshiba’s memory chip business. The Japanese NAND memory chip manufacturer is a crucial supplier to some of the world’s largest electronic gadget manufacturers. Investors are expected to give a thumbs-up to a successful deal, as it would make Apple less dependent on rival company Samsung.
Last week, Bain Capital led consortium issued a letter of intent (LOI) to acquire Toshiba’s chip business for about $19 billion. Reports indicate that the Cupertino, California-based Apple has committed $3 billion to receive a stake in the deal. Bain Capital also joined hands with disk-drive manufacturer Seagate Technology and Dell Inc.
Westinghouse Electric Co., a nuclear unit of Toshiba, filed for bankruptcy earlier this year. In order to bring the shareholder’s equity back into positive territory before March 2018, the company has decided to sell off its profitable chip manufacturing business. A failure to bring the shareholder’s equity to positive territory would result in forceful delisting of Toshiba from the Tokyo Stock Exchange.
Back in June, Toshiba selected the Bain-backed group as the preferred bidder and sought to close the deal in the same month. Bain Capital led consortium had offered about ¥2.1 trillion ($19.1 billion) at that time. However, Toshiba’s partner Western Digital, which is also vying the memory chip business, opposed the deal and resorted to lobbying with Japanese government officials and banks. Later, Toshiba and Western Digital decided to sort out the matter through an arbitration process, which is expected to complete within five or six months.
Apple has entered the fray because of the strategic importance of the business. Apple needs a smooth supply of NAND memory chips for its iPhones and iPods. The biggest acquisition of Apple so far is Beats Electronics, a headphone company, for $3 billion in 2014. Toshiba entered into a non-binding agreement with Bain Capital, last Wednesday, and looks forward to finalizing the deal by the end of September. Since the deal would ensure continuous memory chip supply flow to Apple, investors are likely to respond positively to the news.
The stock has crossed above its 32-period triple exponential moving average. The price chart also indicates support at 158. Finally, the Williams’ Percentage Range indicator is moving out of the bearish zone. Thus, we can expect an upswing in the stock of Apple.
An investment in a call option would enable us to benefit from the probable uptrend. We will invest only if the stock is trading at about $158 in the NASDAQ. Additionally, we require a contract that expires on or around September 27th.
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