Western Digital experiences a setback in its SanDisk acquisition

In the last few months, Western Digital has made moves to become a player in the SSD market. It acquired Skyera, a solid-state storage systems developer, before launching a $19 billion takeover of SanDisk. Today, despite some disappointing financial news, Western Digital affirmed its continued interest in acquiring SanDisk. Western Digital still expects that transaction to close sometime in the second quarter of 2016.

The disappointing news for Western Digital is that a proposed $3.775 billion equity investment from Unis Union has fallen through. After the Committee on Foreign Investment in the United States announced that it would investigate the investment, Unis bowed out. That exit has triggered an alternate offer for SanDisk, in which Western Digital will pay $67.50 per share in cash and 0.2387 shares of Western Digital common stock per share of SanDisk common stock. In total, that means Western Digital values SanDisk at $78.50 per share, less than the $86.50 per share of the original terms revealed in October of last year.

Western Digital's commitment to this acquisition shows just how much the industry has shifted away from mechanical hard drives. While Western Digital's drives remain a popular choice for bulk data storage, solid-state is where the company sees the potential for growth. As Steve Milligan, the company's CEO, said, "We believe the strategic rationale for this acquisition is even more compelling today than when we first announced it in October last year given industry trends and strong execution by both companies." Certainly, SanDisk has been busy in the interim, as we saw during our CES coverage.

The acquisition does have a few more hurdles in the way. The companies are still waiting on regulatory and shareholder approval. We'll have to see whether the somewhat lower price WD is now offering still sits well with investors.

Comments closed
    • ronch
    • 4 years ago

    $19B? Isn’t that a bit too much to acquire a company that practically sells commodities? Is it so hard to just make your own using off-the-shelf parts? Even much smaller Taiwanese players like Transcend and Adata have pulled it off, and I don’t think it’s hard for someone like WD to post job ads for folks with SSD experience. Yes I’m sure that deal includes manufacturing facilities but do those cost $19B? Are those fabs?

      • UberGerbil
      • 4 years ago

      Sandisk has a bunch of IP (Wikipedia says 5800 patents) related to NAND and SD cards. Pretty much all the other manufacturers pay Sandisk something for the right to produce this commodity (or they cross-licensed their own patents). So that’s valuable (especially if SanDisk’s R&D group remains intact and continues churning out patents; those people are often the first to walk when there’s a corporate transition). I don’t know that it’s worth $19B, but it’s worth more than the summary balance sheet for Sandisk would suggest.

        • Airmantharp
        • 4 years ago

        Sandisk is a leader in all things flash, and flash is where all storage is going.

        Western Digital is after the right fish, even if it’s going to be tough to reel in.

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