Western Digital Coughs Up £12.2bn For SanDisk

Western Digital has emerged victorious after it confirmed it is acquiring US flash storage giant SanDisk for a cool $19bn (£12.2bn).

The acquisition comes after reports that SanDisk was in acquisition talks with two suitors, namely Western Digital and Micron.

Chinese Investment

Western Digital said that the deal values SanDisk common stock at $86.50 (£55.94) per share or a total equity value of approximately $19 billion (£12.2bn).

However, that deal hinges on the closing of an investment in Sandisk made by Unisplendour Corp Ltd, a unit of China’s state-backed Tsinghua Holdings Co Ltd.

If that investment closes prior to the SanDisk acquisition Western Digital said it would pay $85.10 (£55.01) per share in cash and 0.0176 shares of Western Digital common stock per share of SanDisk common stock. But if that investment does not close or is terminated, Western Digital will only pay $67.50 (£43.63) in cash and 0.2387 shares of Western Digital common stock per share of SanDisk common stock.

“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,” said Steve Milligan, CEO of Western Digital.

“The combined company will be ideally positioned to capture the growth opportunities created by the rapidly evolving storage industry,” said Milligan. “I’m excited to welcome the SanDisk team as we look to create additional value for all of our stakeholders, including our customers, shareholders and employees.”

There was no word on possible job losses, but Steve Milligan will remain as CEO of the combined company, which will still be headquartered in Irvine, California. SanDisk’s CEO Sanjay Mehrotra is expected to join the Western Digital Board of Directors.

Western Digital and SanDisk do have a number of “ complementary” product lines, including hard disk drives (“HDDs”), solid-state drives (“SSDs”), cloud data centre storage solutions and flash storage solutions.

Western Digital is however a more traditional storage giant than SanDisk, and the deal will give it access to SanDisk’s NAND technology which it allow it to better compete in the solid-state drive (SSD) market.

Tech Consolidation

SSDs are increasingly used in cloud computing, data centres, smartphones and laptops, but SanDisk has had a few setbacks recently.

Its Q2 financials were poor, with revenues down 24 percent from the previous year. The company reported net income of £53 million. And it has been impacted by increased competition, production delays, and poor sales.

SanDisk uses the foundries of Toshiba to make its chips, and Toshiba said that it supports the acquisition.

And it should be noted that the SanDisk deal is just the latest in a number of consolidations across the cloud and storage industry.

In June, Intel acquired Altera for £11 billion, and Singapore-based firm Avago bought US counterpart Broadcom for £24 billion in May.

Dell also recently bought EMC in the biggest technology acquisition of all time, valued at a staggering £44bn.

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