 "Western Digital to buy SanDisk for $19 billion")
Hard-disk drive maker Western Digital Corp said it would buy SanDisk Corp in a deal valued at about $19 billion to expand its business that makes flash memory storage chips used in smartphones and mobile devices.
SanDisk shares rose as high as $78.48 on Wednesday, but were well below the offer price of $86.50 in cash and stock. SanDisk shares may be trading below the offer price because investors were likely looking for a 52-week high takeout price, Wedbush Securities analyst Betsy Van Hees said. SanDisk shares hit a 52-week high of $106.64 on December 8.
There have been a record number of deals in the semiconductor industry this year as companies consolidate to meet demand for cheaper chips and products to power Internet-connected gadgets.
Analysts have said while Western Digital is a major player in the traditional storage industry, it needs access to SanDisk's NAND technology to better compete in the solid-state drive (SSD) market. SSDs are used in cloud computing, data centres, smartphones and laptops.
"We have been thinking about the opportunity to vertically integrate in terms of NAND," Western Digital's Chief Executive Steve Milligan said on a call with analysts.
The value of the transaction depends on the closing of an investment from Unisplendour Corp Ltd, a unit of China's state-backed Tsinghua Holdings Co Ltd, in Western Digital.
However, the investment is expected to draw intense scrutiny from both U.S. and Chinese regulators as accusations of cyber snooping increase between the two countries.
The SanDisk acquisition is not expected to impact the closing of the Unisplendour investment, Western Digital said.
Western Digital also said Toshiba Corp, with which SanDisk has an intellectual property-sharing joint venture, is supportive of the deal. SanDisk also uses the Japanese conglomerate's foundries for making chips.
Toshiba was not immediately available to comment.
Shares of Western Digital, which suspended its share buyback program, fell 3 percent in morning trading.
Earlier on Wednesday, semiconductor equipment maker Lam Research agreed to buy rival KLA-Tencor Corp in a deal valued at about $10.6 billion.
BofA Merrill Lynch and J.P. Morgan are lead financial advisers and Credit Suisse is also advising Western Digital.
Cleary Gottlieb Steen & Hamilton LLP and Baker & McKenzie are legal advisers to Western Digital.
Goldman Sachs is the financial adviser to SanDisk. Skadden, Arps, Slate, Meagher & Flom LLP is its legal adviser.
SanDisk shares rose as high as $78.48 on Wednesday, but were well below the offer price of $86.50 in cash and stock. SanDisk shares may be trading below the offer price because investors were likely looking for a 52-week high takeout price, Wedbush Securities analyst Betsy Van Hees said. SanDisk shares hit a 52-week high of $106.64 on December 8.
There have been a record number of deals in the semiconductor industry this year as companies consolidate to meet demand for cheaper chips and products to power Internet-connected gadgets.
Also Read
"We have been thinking about the opportunity to vertically integrate in terms of NAND," Western Digital's Chief Executive Steve Milligan said on a call with analysts.
The value of the transaction depends on the closing of an investment from Unisplendour Corp Ltd, a unit of China's state-backed Tsinghua Holdings Co Ltd, in Western Digital.
However, the investment is expected to draw intense scrutiny from both U.S. and Chinese regulators as accusations of cyber snooping increase between the two countries.
The SanDisk acquisition is not expected to impact the closing of the Unisplendour investment, Western Digital said.
Western Digital also said Toshiba Corp, with which SanDisk has an intellectual property-sharing joint venture, is supportive of the deal. SanDisk also uses the Japanese conglomerate's foundries for making chips.
Toshiba was not immediately available to comment.
Shares of Western Digital, which suspended its share buyback program, fell 3 percent in morning trading.
Earlier on Wednesday, semiconductor equipment maker Lam Research agreed to buy rival KLA-Tencor Corp in a deal valued at about $10.6 billion.
BofA Merrill Lynch and J.P. Morgan are lead financial advisers and Credit Suisse is also advising Western Digital.
Cleary Gottlieb Steen & Hamilton LLP and Baker & McKenzie are legal advisers to Western Digital.
Goldman Sachs is the financial adviser to SanDisk. Skadden, Arps, Slate, Meagher & Flom LLP is its legal adviser.