Western Digital Corp EVP Mark P. Long Sells 878 Shares (WDC)

22 Oct 2015 | Author: | No comments yet »

Irvine-based Western Digital agrees to buy SanDisk Corp. in $19 billion deal.

NEW YORK — Hard-disk drive maker Western Digital Corp agreed to buy SanDisk Corp in a US$19 billion (S$26.5 billion) deal that will increase its ability to make flash memory storage chips used in smartphones and tablets.The companies said their complementary product lines—hard disk drives, solid-state drives, cloud datacenter and flash storage solutions—will allow for a “broader set of products” for consumers and data centers.

SanDisk shares hit a high of US$78.50 on Wednesday, but closed nearly US$10 below the offer price of US$86.50 in cash and stock, a fact that analysts attributed to the deal’s complexity. The merger also aims to grow Western Digital’s global market presence, not to mention “securing long-term access to solid state technology at lower cost.” “This transformational acquisition aligns with our long-term strategy to be an innovative leader in the storage industry by providing compelling, high-quality products with leading technology,” Western Digital CEO Steve Milligan said in a statement. “Importantly, this combination also creates an even stronger partner for our customers,” SanDisk chief Sanjay Mehrotra added. “Joining forces with Western Digital will enable the combined company to offer the broadest portfolio of industry-leading, innovative storage solutions to customers across a wide range of markets and applications.” Once the deal closes—likely in the third quarter of 2016—Milligan will continue serving as chief executive officer of the combined company, which will remain headquartered in Irvine, California. Western Digital said the value of the transaction hinges on the closing of an investment in the company by Unisplendour Corp Ltd, a unit of China’s state-backed Tsinghua Holdings Co Ltd .

The acquisition, if consummated, will give Western Digital access to NAND flash memory chips, which store data in mobile devices and are increasingly used in hard drives. Unisplendour said in September it would buy 15 per cent of Western Digital for US$3.78 billion, a deal that is likely to face regulatory scrutiny amid national security concerns. SanDisk is one of the largest makers of the NAND chips, which use less power and access information faster, making them more beneficial for cloud-computing data centers. Over the summer, Western Digital launched a new wireless mobile flash drive that makes it easy to share and access content between smartphones, tablets, and PCs, but can also give your phone a quick storage boost. The company, which had a leading 44 percent share of the shrinking hard-drive market in 2014, saw sales decline 4 percent in its most recent financial year.

Research firm Gartner said in October that worldwide semiconductor sales are expected to fall for the first time in three years in 2015, due partly to increasingly saturated market for smartphones. Western Digital, a major player in the traditional storage industry, needs access to SanDisk’s NAND technology to better compete in the market for solid-state drives used in cloud computing, data centers, smartphones and laptops. One, they could have remained conservative and bought back a ton of stock,” said Joe Wittine, an analyst at Longbow Research. “They made the more aggressive play.” Western Digital may use part of the proceeds from a deal with China’s government-owned Unisplendour Corp., which agreed in September to invest $3.8 billion in the Irvine drive maker. exchange The deal, if closed, would give the Chinese government-owned entity a 15 percent stake in Western Digital.

If the Unisplendour investment is not completed or is terminated before the SanDisk deal closes, then Western Digital would pay a significantly higher percentage of the SanDisk purchase price in stock. The spectacle of Orange County companies in acquisition mode stands in stark contrast to earlier this year, when two iconic local companies were gobbled up by overseas rivals.

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