* Talks with some members of preferred bidder group taking time
* Western Digital resubmits bid at eleventh hour
* Threat of Western Digital legal action hangs over sale (Recasts and adds Toshiba statement)
CHIBA, Japan, June 28 (Reuters) - Japan's Toshiba Corp faced shareholders at its annual meeting on Wednesday with no deal in hand for the sale of its prized flash memory chip unit and a long list of humiliating setbacks to apologize for.
Scrambling to cover billions of dollars in cost overruns at its bankrupt Westinghouse nuclear unit, Toshiba had pledged to have a signed definitive agreement for the $18 billion sale of the unit - the world's No. 2 producer of NAND chips - by the shareholders meeting.
But the conglomerate said in a statement on Wednesday that talks with some members of the preferred bidder consortium - which is led by Japanese government investors and includes U.S. private equity firm Bain Capital - were taking time.
Prospects for a quick and smooth deal have become highly uncertain as Western Digital Corp which jointly runs Toshiba's main semiconductor plant, is vehemently opposed to a sale that does not include it and is seeking a U.S. court injunction to prevent any deal that does not have its consent.
Underscoring tensions between the two business partners, Toshiba CEO Satoshi Tsunakawa lambasted Western Digital at the shareholders meeting.
"Western Digital has been interfering with no due cause in the process of the chip unit sale with its request for arbitration and its lawsuit," he said.
Further complicating matters, Western Digital and U.S. private equity firm KKR & Co LP resubmitted an offer for the semiconductor business on Tuesday, in an eleventh hour effort to prevent a deal with the preferred bidder.
While Toshiba said late last week that it was open to talks with its U.S. chip partner, its response to the resubmitted bid has been to only say that is continuing to talk with its preferred bidder.
Western Digital said it will provide debt financing to facilitate a sale as part of the resubmitted bid. It was not immediately clear if terms of the offer had significantly changed from one tabled earlier this month that Western Digital has said met Toshiba's minimum requirement of 2 trillion yen ($18 billion).
Sources with knowledge of the matter have said a state-backed fund, the Innovation Network Corp of Japan (INCJ), and the Development Bank of Japan (DBJ) which are currently part of preferred bidder consortium - would be invited to join Western Digital's resubmitted offer.
While it was not immediately clear what parts of the talks with the preferred bidder consortium were taking time, sources familiar with the matter have said some Toshiba board members are concerned about technology leaks to South Korean chip rival SK Hynix Inc, which is part of the consortium and will provide Bain with financing.
Western Digital has also said it is strongly opposed to SK Hynix's participation and has threatened further legal action.
In addition to failing to sign a deal for the chip unit, Toshiba last week 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.
It has also yet to have auditors sign off on its annual results due to a prolonged probe at Westinghouse and its shares are set to be demoted to the second section of the Tokyo Stock Exchange from Aug. 1.
Toshiba's shares were mostly flat in morning trade, giving the company a market value of 1.25 trillion yen ($11 billion). The stock has lost some 34 percent since last December when the company flagged huge losses at its U.S. nuclear power operations. ($1 = 112.1100 yen) (Reporting by Makiko Yamazaki, Taro Fuse and Kentaro Hamada; Editing by Richard Chang)