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Western Digital to acquire SanDisk for $19 billion

Western Digital has announced plans to acquire SanDisk to form a powerhouse in consumer memory. The deal will set WD back by $19 billion in a combination of cash and stock. With SanDisk under its wing, WD would become a storage solutions company with massive scale on the global stage.

Western Digital would be able to not only offer SSD and hard disk solutions, but also SD and other forms of storage utilizing the expertise SanDisk brings to the table. The boards at both companies have approved the deal, which is expected to close in Q3 of 2016. See the press release below for more details.

Press Release

IRVINE, Calif. and MILPITAS, Calif. — Oct. 21, 2015 — Western Digital® Corporation (NASDAQ: WDC) and SanDisk Corporation (NASDAQ: SNDK) today announced that they have entered into a definitive agreement under which Western Digital will acquire all of the outstanding shares of SanDisk for a combination of cash and stock. The offer values SanDisk common stock at $86.50 per share or a total equity value of approximately $19 billion, using a five-day volume weighted average price ending on October 20, 2015 of $79.60 per share of Western Digital common stock. If the previously announced investment in Western Digital by Unisplendour Corporation Limited closes prior to this acquisition, Western Digital will pay $85.10 per share in cash and 0.0176 shares of Western Digital common stock per share of SanDisk common stock; and if the Unisplendour transaction has not closed or has been terminated, $67.50 in cash and 0.2387 shares of Western Digital common stock per share of SanDisk common stock. The transaction has been approved by the boards of directors of both companies.

The combination is the next step in the transformation of Western Digital into a storage solutions company with global scale, extensive product and technology assets, and deep expertise in non-volatile memory (NVM). With this transaction, Western Digital will double its addressable market and expand its participation in higher-growth segments. SanDisk brings a 27-year history of innovation and expertise in NVM, systems solutions and manufacturing. The combination also enables Western Digital to vertically integrate into NAND, securing long-term access to solid state technology at lower cost.

The proposed combination creates significant value for both SanDisk and Western Digital shareholders. Western Digital brings a successful track record of M&A with a number of acquisitions over the last several years helping to fuel innovation, create value and strongly position the company to capture higher-growth opportunities. In addition, Western Digital's operational excellence, coupled with the recently announced decision by China's Ministry of Commerce (MOFCOM) allowing Western Digital to integrate substantial portions of its WD and HGST businesses, is expected to generate additional cost synergies.

"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, chief executive officer, Western Digital. "The combined company will be ideally positioned to capture the growth opportunities created by the rapidly evolving storage industry. 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."

"Western Digital is globally recognized as a leading provider of storage solutions and has a 45-year legacy of developing and manufacturing cutting-edge solutions, making the company the ideal strategic partner for SanDisk," said Sanjay Mehrotra, president and chief executive officer, SanDisk. "Importantly, this combination also creates an even stronger partner for our customers. 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."

Western Digital and SanDisk's complementary product lines, including hard disk drives ("HDDs"), solid-state drives ("SSDs"), cloud datacenter storage solutions and flash storage solutions, will provide the foundation for a broader set of products and technologies from consumer to datacenter. Both companies have strong R&D and engineering capabilities and a rich base of fundamental technologies with over 15,000 combined patents issued or pending worldwide.

Toshiba has been a long-term strategic partner to SanDisk for 15 years. The joint venture (JV) with Toshiba will be ongoing, enabling vertical integration through a technology partnership driven by deep collaboration across design and process capabilities. The JV provides stable NAND supply at scale through a time-tested business model and extends across NVM technologies such as 3D NAND.

Steve Milligan will continue to serve as chief executive officer of the combined company, and the company will remain headquartered in Irvine, California. Upon closing, Sanjay Mehrotra is expected to join the Western Digital Board of Directors.

Led by a seasoned management team, Western Digital has a strong track record of integrating acquisitions to create value. The company expects to achieve full annual run-rate synergies of $500 million within 18 months post-closing. The transaction is expected to be EPS accretive on a non-GAAP basis within 12 months of the transaction close. Pending the closing of the transaction, Western Digital expects to continue paying its quarterly dividend and plans to suspend its share buyback program.

The transaction will be financed by a mix of cash, new debt financing and Western Digital stock. In connection with the transaction, Western Digital expects to enter into new debt facilities totaling $18.4 billion, including a $1.0 billion revolving credit facility. The proceeds from the new debt facilities are expected to be used to pay part of the purchase price, refinance existing debt of Western Digital and SanDisk and pay transaction related fees and expenses. If SanDisk's cash balance falls below certain thresholds at the time of transaction close, the merger agreement provides for an adjustment to the mix of cash and stock consideration.

The transaction is subject to approval by SanDisk shareholders and, in the event that the Unisplendor transaction does not close, Western Digital shareholders, receipt of regulatory approvals and other customary closing conditions. The transaction is expected to close in the third calendar quarter of 2016.

BofA Merrill Lynch and J.P. Morgan are acting as lead financial advisors to Western Digital and will provide committed financing for the transaction. Also, Credit Suisse is acting as a financial advisor and providing committed financing, and RBC Capital Markets is providing committed financing. Cleary Gottlieb Steen & Hamilton LLP and Baker & McKenzie are acting as legal advisors to Western Digital.

Goldman Sachs is acting as the exclusive financial advisor to SanDisk. Skadden, Arps, Slate, Meagher & Flom LLP is acting as the exclusive legal advisor to SanDisk.

19 Comments
  • The way things are going there's going to be like 10 companies left in 10 years.
  • Ya no competition and higher prices on storage medium :/. If you disagree with that statement please respectfully educate me. Posted from my Nexus 6/Nexus 7 2013/Surface Pro 3
  • I don't think these two companies compete in the same products. There should not be a change in competition and price. Posted via the Android Central App
  • This guy gets it. SanDisk and Western Digital deal in different mediums, so the competition factor doesn't come into play here. It's possible, though, that as one company, they might be able to make better deals for materials that could result in MORE competitive pricing. Posted via the Android Central App powered by Droid Turbo
  • Don't forget that after they lower there prices and kill off there Competition they will be the only ones left to Dictated the prices in the Future, so maybe not so good for the consumer in the long run.
  • I'm a big fan of Western Digital spinning hard drives. Most drives last well past their warranty date. If they do fail customer service has been excellent. I suspect Samsung is eating their lunch in the SSD market. I hope they can stick around.
  • I agree, I always buy WD for spinning discs, it'll be a cold day in hell before I buy anything with Seagate written on it. But as far as I know they didn't bring any lunch for Sammy to steal... I'm pretty sure they don't have a flash storage arm, hence this acquisition. Posted via the Android Central App
  • Sandisk isn't the only game in town. I used to swear by sandisk but to be honest I think their quality control is slipping. Lexar, Patriot, Kingston and even PNY get the job done for me in my cameras with a lower fail rate. Posted via the Android Central App
  • I had 2 Kingston ssd drives fail in less than 6 months. The wd is still going. Posted via the Android Central App
  • I got a wd 1tb external drive that works awesome and the included software is actually not crap. Posted from my Nexus 6/Nexus 7 2013/Surface Pro 3
  • I bought a thing from a company and my experience with that thing completely correlates to everyone's experience with everything from that company. Posted via the Android Central App powered by Droid Turbo
  • I read somewhere only SanDisk and Samsung make sd cards and they sell the best units under their own brands.
  • You are correct that SanDisk makes cards for other companies but they don't give the scraps to the other companies. Posted via the Android Central App
  • Goldman Sachs get a large chunk of every pie, lol. If I were SanDisk s/h's take that money and run.
    SD cards in 5 years?
    They would have to diversify and invest a lot going forward.
  • SD cards will be around for 10 more years at the least. Posted from my Nexus 6/Nexus 7 2013/Surface Pro 3
  • Exactly Dam It Feels Good To Be A Google Gangster
  • Well, well..........Seagate owns WD and WD will purchase Sandisk................Seagate owns everybody now.
    New name I'm guessing would be " SeaWestDisk" sweet.
  • And on top of that, more and more PC part manufacturer's could also jump into that market next. Not hard for Asus or Corsair to take up solid state flag next. Posted via the Android Central App
  • Don't you guys know? Everything in the entire world is owned by 4 people And soon 2 of them are going to merge. Will the real Walmart please stand up (Sarcasm Alert)