TOKYO (Reuters) - Toshiba Corp said it was open to talks with Western Digital Corp in their dispute over the sale of the Japanese conglomerate’s prized chip unit - an apparent olive branch after it chose another suitor as preferred bidder.

Toshiba Corp CEO Satoshi Tsunakawa (L) bows during a news conference after asking regulators for extension on financial filing and deal on chip unit sale, at the company headquarters in Tokyo, Japan June 23, 2017. REUTERS/Issei Kato

The two have been feuding bitterly and Western Digital, which jointly runs Toshiba’s main semiconductor plant, has sought a U.S. court injunction to prevent any deal that does not have its consent.

The softer tone from Toshiba comes on a day of further indignities as the crisis-wracked conglomerate saw itself demoted to the second section of the Tokyo Stock Exchange and estimated bigger losses for the past financial year.

This week it chose a consortium of Bain Capital and Japanese government investors as preferred bidder for the unit, the world’s No. 2 producer of NAND flash chips. It wants to clinch a deal, worth some $18 billion, by June 28, the day of its shareholders meeting.

“Western Digital used to be a good partner, so we want to continue talks. I’m disappointed with the current dispute,” Toshiba CEO Satoshi Tsunakawa told a news conference, adding it was important that they joined forces to better compete against bigger rival Samsung Electronics.

“We want Western Digital to jointly invest to fight against Samsung. It will be so disappointing if we can’t do so because of the dispute,” he said.

But in a sign that tensions were still high, Tsunakawa also said Toshiba was not going to be the first to propose the U.S. firm join the consortium and it was still considering whether to block Western Digital employees not based at the plant from accessing joint venture data servers.

Tsunakawa also said he did not expect any changes to the make-up of the consortium before June 28.

Western Digital’s offer had not found favor on price and because the U.S. firm wanted to take control of the unit, he said, adding that he expected executives from Toshiba to still be running operations after the sale.

His comments come after sources familiar with matter said earlier this week that the Bain consortium members had made resolving the dispute with Western Digital a condition of their investment.

Representatives for Western Digital were not immediately available to comment.

HYNIX HURDLES?

South Korean chipmaker SK Hynix Inc is also part of the Bain consortium and its membership has raised concerns that the winning bid may find it difficult to clear anti-trust reviews.

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Its presence has made Western Digital reluctant to join the group in its current form due to worries that high-level technology for NAND chips, which provide long-term data storage, could be leaked to its rival, sources familiar with the matter have said.

But Tsunakawa said SK Hynix would not be holding any equity and would not be involved in management - an arrangement that was unlikely to raise regulatory red flags and would prevent leaks of key technology information.

SK Hynix, which is relatively weak in NAND flash memory chips, has said it has joined the group because it sees new business opportunities. It will provide half of the 850 billion yen ($7.6 billion) that Bain plans to put up in the form of financing, sources have said.

Earlier in the day, Toshiba flagged a net loss of around $9 billion for the year ended in March with negative shareholders’ equity of around $5.2 billion, both worse than expected on an increase in liabilities at bankrupt nuclear unit Westinghouse and potential legal damages.

With negative shareholder equity confirmed, the Tokyo Stock Exchange said it would move Toshiba’s listing to the second section of the bourse from Aug. 1 - the latest in a series of humiliating developments since December for a firm that has been in business for more than 140 years.

Toshiba also received regulatory approval to delay filing its annual earnings by more than a month amid a prolonged accounting investigation at Westinghouse. It is the sixth time since 2015 that Toshiba has delayed an earnings filing.

Regulators have now given Toshiba until Aug. 10 instead of June 30 to submit the filing. Failure to gain an extension would have put the troubled company’s stock exchange listing in further jeopardy, although it still needs to dig itself out of negative shareholders’ equity by the end of this financial year to stay listed.