(Reuters) – Challenging-disk travel maker Western Digital Corp (WDC.O) agreed to acquire SanDisk Corp SNDK.O in a $19 billion offer that will enhance its capacity to make flash memory storage chips applied in smartphones and tablets.
SanDisk shares hit a superior of $78.fifty on Wednesday, but shut nearly $ten beneath the provide rate of $86.fifty in cash and stock, a reality that analysts attributed to the deal’s complexity.
Western Digital said the benefit of the transaction hinges on the closing of an financial investment in the firm by Unisplendour Corp Ltd, a unit of China’s condition-backed Tsinghua Holdings Co Ltd [TSHUAA.UL].
Unisplendour said in September it would acquire 15 p.c of Western Digital for $three.78 billion, a offer that is very likely to confront regulatory scrutiny amid countrywide protection problems.
Western Digital Chief Govt Steve Milligan said in an interview that the Sandisk acquisition will eventually dilute Unisplendor’s stake and that he was highly confident it would be accredited by regulators.
“There’s generally a chance and you are not performed until eventually you are performed, but we were mindful and consulted with U.S. authorities gurus,” he said.
Western Digital’s transfer to acquire SanDisk is the hottest in a flurry of deals in the U.S. semiconductor market, which has been hit by a offer glut and more affordable merchandise from China that have driven down memory chip charges.
Research business Gartner said in October that around the world semiconductor gross sales are expected to tumble for the initial time in three yrs in 2015, thanks partly to significantly saturated marketplace for smartphones.
Western Digital, a big participant in the classic storage market, wants access to SanDisk’s NAND technological innovation to much better compete in the marketplace for strong-condition drives applied in cloud computing, facts centers, smartphones and laptops.
Western Digital said it had the guidance of SanDisk associate Toshiba Corp (6502.T), which has some rights that could block a offer.
SanDisk has an intellectual property sharing joint undertaking with the Japanese firm and makes use of its foundries to make chips.
Toshiba spokeswoman Midori Hara said in an email that the offer would not have a unfavorable effects on that joint undertaking.
Shares of Western Digital, which also suspended its share buyback plan, were down one.4 p.c at $seventy three.85.
Financial institution of America Merrill Lynch (BAC.N) and J.P. Morgan (JPM.N) were lead fiscal advisers though Credit Suisse and Rothschild also recommended Western Digital. Cleary Gottlieb Steen & Hamilton LLP and Baker & McKenzie are lawful advisers to Western Digital.
Goldman Sachs is the fiscal adviser to SanDisk. Skadden, Arps, Slate, Meagher & Flom LLP is its lawful adviser.
Reporting by Abhirup Roy Devika Krishna Kumar in Bengaluru and Liana B. Baker in New York Editing by Anil D’Silva and Alan Crosby