Toshiba is planning to sue joint venture partner Western Digital for 120 billion yen ($1 billion), accusing the company of meddling in the sale of Toshiba's flash memory chip business.
On Wednesday, the Japanese tech giant said Western Digital had "continually interfered with the bid process" and "exaggerated" the amount of power the firm has in relation to any potential sale.
In addition, Toshiba has taken steps to prevent Western Digital employees based out of the Yokkaichi plant from accessing any information relating to the partnership between the two companies.
Toshiba was close to completing the sale of the flash memory chip business on Tuesday to Japanese government-backed fund, SK Hynix, and Bain Capital, as reported by the Financial Times, in a deal worth an estimated $18 billion.
However, the completion of the sale had to be delayed as Western Digital opposed the bid, scrambling to submit another bid for the chip unit together with US private equity group KKR.
Western Digital's original bid had been rejected.
The company says that while the sale relates to three NAND flash-memory joint ventures operated with Western Digital's SanDisk subsidiaries, Toshiba "continues to ignore both SanDisk's consent rights and the dual-track legal process currently underway."
Last week, Western Digital filed for an injunction with US courts to prevent the sale to the consortium going forward without its consent.
"Toshiba Corporation's attempts to circumvent our contractual rights have left us with no choice but to take this action," said Steve Milligan, chief executive officer of Western Digital. "It is our concern that, left unchecked, Toshiba would pursue a course that clearly violates these rights and also runs decidedly counter to the best interests of the JVs and also to the hard working people at Toshiba Corporation's NAND Flash business in Japan."
As the tech giant is in financial difficulty, Toshiba needs a sale to go through. The company was thrown into disarray following the failure of the firm's US nuclear power unit Westinghouse Electric, which has filed for bankruptcy protection.
Toshiba has already lost at least $6.3 billion already because of the plant construction services company, but implementing these changes could cost up to one trillion yen ($9 billion).
The sale of the NAND flash memory business must be a heartbreaker, considering it is one of Toshiba's most profitable divisions -- but it does highlight just how precarious Toshiba's financial position is.
The company has already faced the threat of being delisted from the Tokyo Stock Exchange unless it can improve shareholder equity by March 2018, and predicts a net loss of 995 billion yen for the year up to this date.
Toshiba says the company is still in negotiations with its preferred bidder but hopes to ink a final deal before the start of the Toshiba AGM on Wednesday.