Western Digital would be ~50% owned by WD shareholders but run by Kioxia **** Merger cancelled. Long live Western Digital?

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Terms of the Western Digital-Kioxia deal, according to Reuters, would be 43% owned by Kioxia, 37% by Western Digital, and the rest by existing shareholders of the companies.

Western Digital Stock Spikes on Report It Nears Flash Memory Merger With Kioxia

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Eric J. Savitz

May 15, 2023 12:31 pm ET

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Most of Western Digital’s flash-memory chips are produced by the company’s joint venture with Japan-based Kioxia.

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Western Digital WDC +11.26% stock was trading sharply higher Monday after a report that merger talks with the company’s partner in flash-memory production, Kioxia Holdings, are speeding up.

Western Digital (ticker: WDC) produces both disk drives and flash-memory products. Most of the company’s flash-memory chips are produced through a joint venture with Japan-based Kioxia.

Soft demand in the flash-memory market is increasing pressure on the two companies to reach a mergaer agreement, Reuters reported.

Neither Western Digital nor Kioxia immediately responded to a request for comment.

In midday trading, Western Digital shares were up 9.7% to $36.24.

Last year, activist investor Elliott Investment Management urged Western Digital to spin off the flash-memory business, and the company later said it was considering a split.

Western, which along with rival Seagate (STX) dominates the market for hard-disk drives, entered the flash-memory business with the 2016 acquisition of SanDisk for about $19 billion. Western’s current market cap is $11.3 billion.

Kioxia was previously Toshiba ’s flash-memory business, which was sold in 2018 to a group led by Bain Capital for $18 billion. Toshiba still owns 40.6% of Kioxia.

Terms of the Western Digital-Kioxia deal, according to Reuters, would be 43% owned by Kioxia, 37% by Western Digital, and the rest by existing shareholders of the companies.

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What a storied tale of American technology and innovation. What most users don’t know about WD. This is really an end of an era.

Western Digital Corporation (WDC, commonly known as Western Digital or WD) is an American computer drive manufacturer and data storage company, headquartered in San Jose, California. It designs, manufactures and sells data technology products, including data storage devices, data center systems and cloud storage services.

Western Digital has a long history in the electronics industry as an integrated circuit maker and a storage products company. It is one of the largest computer hard disk drive manufacturers, along with producing solid state drives and flash memory devices. Its competitors include the data management and storage companies Seagate Technology and Micron Technology.[3]

History

Western Digital logo history

Logo used from 1970 to 1971

Logo used from 1971 to 1991

Logo used from 1991 to 1997

Logo used from 1997 to 2004

Logo used from 2004 to 2017

Logo used from 2017 to 2022

Current logo

1970s

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First headquarters of Western Digital (then General Digital) in Newport Beach, California, pictured in 1971

Western Digital was founded on April 23, 1970, by Alvin B. Phillips, a Motorola employee, as General Digital Corporation, initially a manufacturer of MOS test equipment.[4] It was originally based in Newport Beach, California,[5] shortly thereafter moving to Santa Ana, California, and would go on to become one of the largest technology firms headquartered in Orange County.[6] It rapidly became a specialty semiconductor maker, with start-up capital provided by several individual investors and industrial giant Emerson Electric. Around July 1971, it adopted its current name and soon introduced its first product, the WD1402A UART.

During the early 1970s, the company focused on making and selling calculator chips, and by 1975, Western Digital was the largest independent calculator chip maker in the world. The oil crisis of the mid-1970s and the bankruptcy of its biggest calculator customer, Bowmar Instrument,[7] changed its fortunes, however, and in 1976 Western Digital declared Chapter 11 bankruptcy. After this, Emerson Electric withdrew their support of the company. Chuck Missler joined Western Digital as chairman and chief executive in June 1977, and became the largest shareholder of Western Digital.

In 1973, Western Digital established its Malaysian plant, initially to manufacture semiconductors.[8]

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Western Digital and Japan’s Kioxia Seek to Reach Merger Deal by August

Liana Baker

July 14, 2023· 2 min read
In this article:

WDC +1.26%

(Bloomberg) – Western Digital Corp. and Kioxia Holdings Corp. — after months of talks — aim to reach a merger agreement by August, according to people familiar with the matter.

The deal would be structured as a tax-free spinoff of Western Digital’s flash business, which would merge with Kioxia, said the people, who asked to not be identified because the details are private. Western Digital shareholders would own slightly more than 50% of the merged entity, the people said.

Shares of Western Digital, which had fallen more than 14% in the past year, rose as much as 6.5% in trading Friday. The shares closed up 0.8% to $39.66 in New York, giving the company a market value of about $12.7 billion.

The company would be run by Kioxia executives on a day-to-day basis, with Western Digital executives also being involved, the people added. Financing is in place, they said.

Both chipmakers would have board representation and the combined company would be domiciled in Japan, they said. The merged entity would trade on the Nasdaq initially but eventually list in Tokyo, they said. Bain Capital, which backs Kioxia, would be paid a special dividend, they said.

A final agreement hasn’t been reached and the timing could change, or talks could still end without one, the people added. Closely held Kioxia, also backed by Toshiba Corp., was spun out of Toshiba in 2018.

Representatives for Western Digital and Bain declined to comment. Kioxia and Toshiba didn’t immediately respond to requests for comment.

The companies, which have a joint venture that produces flash chips, have been circling each other for years and joining forces would help them take on Samsung Electronics Co.

Last year, Western Digital announced a review of strategic alternatives following talks with activist investor Elliott Investment Management. Bloomberg News reported in January that Western Digital and Kioxia had revived merger talks, after discussing a pairing in 2021.

–With assistance from Ian King and Michelle F. Davis.

(Updates with closing share price for Western Digital in third paragraph.)

Most Read from Bloomberg Businessweek

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If you ever wonder how Western Digital got into this poor state and had to sell itself, this was the problem:

At a deeper level, Western’s woes date to the SanDisk deal, which was intended to diversify the company away from slowing hard drive sales. But the company’s market cap is now $8 billion below what it paid for SanDisk. The acquisition, Craig-Hallum analyst Christian Schwab recently asserted, “has played out to be a failure any way you look at it.”

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This is secondary. If the business was healthy and margin growing, this would not have mattered. There is always incompetence in businesses all around.

Hardly. Apple’s margins is around +48% while WD was -14%, so whatever WD was doing, they were in the low margin business trying to sell to a segment that was not going to pay too much for their product and services. Apple as other trillion dollar IT companies figured cloud computing and storage based on a subscription model was going to be 10 times more profitable than trying to sell hardware storage to retail and small businesses and they were rewarded for their decision.

WD tried to make it up by paying $10 billion too much for Sandisk was what broke WD.

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Kioxia, Western Digital close to merger

Friday, Oct. 13, 20:49

Japanese flash memory chip maker Kioxia Holdings and its US partner Western Digital are close to finalizing a merger.

When realized, the merger will create a chip producer comparable to the world flash memory leader, Samsung Electronics of South Korea.

Kioxia was the world’s third-largest flash memory maker in 2022, while Western Digital ranked 4th.

Sources close to the merger talks say the two firms are aiming to set up a holding company. They are said to be on track to conclude the talks by the end of October.

Western Digital is expected to provide more than 50 percent of the capital for the new firm, while a majority of the board members, including the president, will be from Kioxia.

Japanese banks are said to be lending the new company around 13 billion dollars.

But whether South Korean chip maker SK hynix, which is a shareholder in Kioxia, will agree to the merger is uncertain.

Kioxia and Western Digital have already made joint investments in plants in Japan’s Mie and Iwate prefectures.

Demand for flash memory is expected to grow for use in data centers and other purposes. But businesses are burdened with the large investments they must make in facilities to stay in competition.

The merger could help make investing more efficient.

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Interesting. If WDC merges with Kioxia, then there’ll be only two HDD vendors; Toshiba and Seagate.
IMHO, Quantum was the best till its problematic LCT series, thus agreed to sell its HDD business to Maxtor. As we all know, Seagate then purchased Maxtor.
BTW one warning for merging with Kioxia… Kioxia ended its SATA SSD lines by 2021 or 2022. I empathize their reason but… this can also mean, Kioxia may end HDD line of WDC after some years of merging. Who knows!

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***But SK Hynix officially declared its opposition to the deal on Thursday. WDC stocks down 9.3%
Nikkei staff writers October 26, 2023 23:15

Western Digital Corp. As of October 26, 2023 • 4:00 PM EDT
NASDAQ: WDC
38.26USD

-3.92(9.29%)

Western Digital and Kioxia scrap memory chip merger talks

Companies fail to bring SK Hynix and Bain on board with plan

1400Ă—786 53.3 KB

Kioxia has been looking to merge with Western Digital’s memory chip business. (Photo courtesy of Kioxia Holdings)

Nikkei staff writers October 26, 2023 23:15 JSTUpdated on October 27, 2023 00:18 JST

TOKYO – Negotiations to merge Western Digital’s semiconductor memory business and Japan’s Kioxia Holdings have been terminated, Nikkei learned Thursday.

The companies were aiming to reach an agreement by the end of October. U.S.-based Western Digital by Thursday had notified Kioxia that it would exit the talks after the merger failed to secure approval from SK Hynix, an indirect shareholder in Kioxia.

The companies were also unable to agree on the merger’s conditions with Bain Capital, Kioxia’s top shareholder.

Kioxia, formerly known as Toshiba Memory, and Western Digital have both suffered a downturn in earnings amid headwinds in memory chips. They are each seeking capital infusions and other measures to help bolster operations.

Kioxia ranks third in global market share for NAND flash memory, while Western Digital ranks fourth. The proposed merger would have resulted in an entity that rivals market leader Samsung Electronics, and the companies had hoped the larger scale would lead to greater profits and growth.

But SK Hynix officially declared its opposition to the deal on Thursday.

SK Hynix had invested about 400 billion yen ($2.67 billion at current rates) in the Bain-led consortium that acquired what is now Kioxia from Toshiba. The South Korean company is now second only to Samsung in NAND memory, and was worried that the Western Digital-Kioxia merger would hurt its position while derailing partnerships it had been exploring with Kioxia.

Western Digital collaborates with Kioxia on chip development and production, including by investing in Kioxia’s plants in Japan. The companies are expected to continue partnering despite the recent developments.