Kioxia (formerly Toshiba Storage, sold to Bain Capital in the United States for US$18 billion in 2018, and renamed Kioxia in October 2019) and Western Digital have been merging since 2021 However, the merger was opposed by SK Hynix, so the merger negotiations were suspended on October 26.
Western Digital announced on Monday that it will spin off into two independent publicly traded companies focused on the hard drive and flash memory markets after merger talks with Kioxia stalled.
Western Digital’s stock price has risen by more than 10% before the market opens.
The company launched a review last year after activist investor Elliott Management disclosed its nearly $1 billion stake in Western Digital and pushed it to separate the businesses.
The deal became complicated last week after reports emerged that merger talks between Western Digital and Kioxia had stalled due to opposition from Kioxia investor SK Hynix.
According to reports, Western Digital has been grappling with a global chip glut and weak demand for flash memory products, which in turn has increased pressure on chip manufacturers to consolidate.
If the deal between Western Digital and Kioxia is successful, the combined company will account for one-third of the global NAND flash memory market and will be on par with the leading manufacturer Samsung Electronics. This situation will inevitably have a negative impact on SK, the world’s third largest NAND flash memory manufacturer. Hynix’s position poses a threat.
“Given current constraints, it has become increasingly clear to the Board in recent weeks that a spin-off is the right next step in Western Digital’s evolution and will best position the company to unlock value for our shareholders,” CEO David Goeckeler said.
The separation of the businesses will occur on a tax-free basis and is scheduled to be completed in the second half of 2024, according to the company’s plan.
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