Toshiba and Western Digital have agreed in principle to settle their legal dispute over the $18 billion sale of Toshiba's flash-memory business with a formal announcement expected soon.

According to Bloomberg's sources, Western Digital will drop arbitration claims in the U.S. that were aimed at stopping Toshiba from selling the chip business to a consortium led by Bain Capital, while the Japanese company will end its legal claims against Western Digital. As part of the settlement, Western Digital will be able to invest alongside Toshiba in a cutting-edge chip plant in Japan and receive a guaranteed supply of next-generation memory chips.

The chip memory partners have been locked in a legal battle since early this year after Toshiba said it would sell the chip business to pay for losses in its U.S. nuclear business. The U.S. company had argued Toshiba needed its consent to sell the business, an assertion the Japanese company disputed.

Last month, Toshiba said it would accelerate investments in its new Fab 6 chip facility in Yokkaichi, blocking Western Digital from participating and raising the prospect the U.S. company wouldn't get supplies of newer chips that it will need to remain competitive.

Toshiba also unveiled plans to raise 600 billion yen ($5.3 billion) in a stock sale, a deal that would help it avoid delisting even if the chip business sale isn't completed on time. This massive share offering suddenly meant that Toshiba no longer had to rush the memory unit sale, giving it an advantage in its negotiations with Western Digital. Obviously, the development added more pressure to WD.

Toshiba agreed in September to sell the business to a group of investors, including Bain, Apple, Dell and South Korea's SK Hynix Inc. The deal is structured so that Toshiba and Hoya Corp. will hold a majority of the voting stock, a solution that keeps control of sensitive technology in Japanese hands.