In 2016, American hard drive maker Western Digital acquired solid-state storage maker SanDisk while gaining control of a joint venture with Toshiba, of which Kioxia later became a co-owner. The American side is now preparing a new phase of transformation, which envisages the sale of the storage business to Kioxia.
Basically, there have been rumors about negotiations between Western Digital and Kioxia since 2021, but it was initially suggested that Western Digital would take the leading role in the potential tandem. In recent years, analysts have increasingly suggested that it would be prudent to separate Western Digital Corporation’s “solid-state” business because the core assets themselves are more highly valued than they would be as part of a single company.
As explained Nikkei Asian Review In another publication on this topic, the concept of combining Kioxia and Western Digital was recently revised and now the first of the companies will take the leading role. After exchanging the required number of shares of the new company, Western Digital would retain 50.1% of the assets and the remaining 49.9% would go to Kioxia, but at the same time the president of Kioxia would manage the business, and representatives of the Japanese company would occupy most of the board. The new company would be registered in the United States, but its headquarters would be in Japan. The deal would be public; The company’s shares will be listed both in the United States and on the Tokyo Stock Exchange.
Last year, Western Digital and Kioxia together controlled 32% of the flash memory market, just behind leader Samsung Electronics at 34%. Negotiations are currently underway with potential creditors who could provide between $10 billion and $12.7 billion in funds to implement the transaction, including major Japanese banks.
Of course, there may be serious obstacles to the implementation of this long-discussed agreement. First, Chinese antimonopoly authorities could simply block this deal, as has happened with several failed takeovers of American companies in recent years. Second, registration of the combined company in the United States will subject the parties to the transaction to increased export controls by American authorities and will make it more difficult to sell Kioxia products in China, which remains a large market. Finally, the current decline in the NAND memory market could make it difficult to raise the debt capital needed to complete the deal. Since the fourth quarter of last year, Western Digital and Kioxia have been making continuous losses in the production and sales of solid-state storage. If Kioxia is considered the third largest NAND manufacturer, Western Digital is content with fourth place.
According to experts, business consolidation in the field of solid-state memory production is necessary because costs are rising and the cyclical nature of the market leads to regular fluctuations in cash flows when ups follow downs, which is easier for large companies that have great financial strength to survive times of crisis.