The purchase, which local media put at around $870 million, was aimed at expanding the global reach of Toshiba's half-owned Toshiba Tec Corp (6588.T), making it the world's largest vendor of POS systems and equipment, the source told Reuters.

The company's board had yet to meet to finalize the deal, the source added.

Toshiba Tec shares gained 7.5 percent in Tokyo to 329 yen, outperforming a flat overall market.

Toshiba Tec would pay 70 billion yen ($870 million) for the IBM business - which counts Wal-Mart (WMT.N) and Toys "R" Us (TOYS.N) as customers - mainly financing the deal with cash reserves and bank loans, the Nikkei business daily reported.

IBM holds the top slot in the global POS terminal market with a share of 22 percent, the Nikkei said, compared with a 7 percent share for the Toshiba subsidiary.

IBM's technology would strengthen Toshiba's cloud computing services that enable stores, shoppers, manufacturers and others to exchange information and offer services, it said.

($1 = 80.3800 Japanese yen)

(Reporting by Maki Shiraki in TOKYO and Sagarika Jaisinghani in BANGALORE; editing by Sreejiraj Eluvangal and Richard Pullin)

• A Permanent Economic Emergency