TOKYO (Reuters) - Toshiba Corp 6502.T and Western Digital Corp WDC.O are close to settling a legal dispute that has threatened to become a major stumbling block in the embattled Japanese conglomerate's plans to sell its $18 billion semiconductor unit, media reported.

Toshiba agreed in September to sell the unit, the world's second biggest producer of NAND chips, to a consortium led by Bain Capital LP and including South Korean chipmaker SK Hynix 000660.KS.

But Western Digital, Toshiba’s chip joint venture partner and jilted suitor in the auction of the unit, argues that no deal can proceed without its consent and is seeking an injunction and a ruling from the International Court of Arbitration.

Jiji news agency reported that while Toshiba and Western Digital have agreed to work towards a settlement, the amount of influence that SK Hynix will exert over the chip unit remains a sticking point between Bain and Western Digital.

Bloomberg news reported, citing people familiar with the matter, that the two sides were close to an agreement and that the U.S. firm would drop its efforts to block the deal in exchange for an extension of their joint venture agreements.

Toshiba is always open to a settlement with Western Digital although nothing concrete has been decided, a spokeswoman for the company said. A representative for Western Digital was not immediately available for comment outside regular business hours.

Toshiba’s shares were up 2 percent in early afternoon trade on Friday.

Toshiba, which needs to sell the unit to cover billions of dollars in liabilities at its bankrupt U.S. nuclear reactor maker Westinghouse, gained more negotiating power in its talks with Western Digital after arranging a $5.4 billion new share issue to more than 30 overseas investors.