Western Digital today announced that they will acquire SanDisk for a combination of cash and stock. The offer values SanDisk's common stock at a total equity value of approximately $19 billion. According to Western Digital's blog, this is their next step in transforming the company 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 looks to double its addressable market and expand its participation in higher-growth segments. SanDisk brings a 27-year history of 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.
Why this acquisition is a no-brainer
The proposed combination creates 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 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 them to integrate substantial portions of its WD and Hitachi Global Storage Technologies(HGST) businesses, is expected to generate additional cost synergies. Steve Milligan, CEO, Western Digital, said:
"This acquisition aligns with our long-term strategy to be a leader in the storage industry by providing compelling, high-quality products with leading technology. The combined company will be ideally positioned to capture the growth opportunities created by the rapidly evolving storage industry."
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 over 15,000 combined patents issued or pending worldwide.
Western Digital Corp. founded in 1970, is a leading developer and manufacturer of storage solutions that enable people to create, manage, experience and preserve digital content. SanDisk Corporation, on the other hand is a Fortune 500 and S&P 500 company and is a global leader in flash storage solutions. Sanjay Mehrotra, president and CEO, SanDisk said:
"Western Digital is globally recognized as a leading provider of storage solutions and has a 45-year legacy of developing and manufacturing solutions, making the company the ideal strategic partner for 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 storage solutions to customers across a wide range of markets and applications."
Steve Milligan will continue to serve as CEO of the combined company, and they will remain headquartered in Irvine, California. Upon closing, Sanjay Mehrotra is expected to join the Western Digital Board of Directors. Western Digital expects to achieve full annual run-rate synergies of $500 million within 18 months post-closing. 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, re-finance existing debt of Western Digital and SanDisk and pay transaction related fees and expenses. The transaction is expected to close in the third calendar quarter of 2016.