Western Digital announced yesterday that it will receive an investment of 900 million US dollars (currently about 6.075 billion RMB) led by Apollo Global Management Company to obtain financial support during the difficult period when the storage industry may face further integration. . Earlier, Western Digital shares fell more than 6% in after-hours trading due to a disappointing revenue outlook.
Apollo’s funds will buy Western Digital’s convertible preferred stock, and Apollo partner Reed Rayman will get a seat on Western Digital’s board, according to an announcement. Hedge fund Elliott Investment Management also participated in the investment.
Yesterday’s investment is a precursor to a merger between Western Digital and Japan’s Kioxia, the sources said. The merger negotiations are still active. Western Digital’s hard drive business is expected to remain independent, though details could still change.
According to previous reports, the parties have finalized a general transaction structure, and Western Digital will spin off the flash memory business and merge with Kioxia to establish a US listed company. Western Digital declined to comment on the deal talks.
Western Digital CEO David Goeckeler said Apollo and Elliott will help Western Digital in the next phase of its strategic review. “We look forward to working together to advance our goal of creating value and delivering the best possible strategic outcome for our shareholders,” he said in the announcement.
Apollo’s Lehman says Western Digital is “an iconic American business critical to the world’s digital infrastructure”.
Last June, Western Digital announced it would review possible strategic options for the company after communicating with activist investor Elliott.
Elliott managing partner Jesse Cohn and senior investment manager Jason Genrich said they were “encouraged by the progress Western Digital has made in its strategic review.”
As consumers cut back on smartphones and computers, Western Digital is grappling with an industry oversupply and the ensuing drop in profits and revenue. In the past, during such a downturn in the industry, the company would survive through mergers and acquisitions to expand its operating scale. So far, there are only a handful of manufacturers in the field of flash memory and computer storage after multiple rounds of mergers and acquisitions.
Currently, Samsung, as one of the world’s largest electronics and semiconductor manufacturers, has a dominant position in this market.
Western Digital expects revenue for the quarter to be as low as $2.6 billion (currently about 17.55 billion RMB), lower than the average analyst estimate of $3.1 billion according to Bloomberg statistics. Western Digital shares fell more than 6 percent in after-hours trading in U.S. stocks after the news was announced. Western Digital shares are up 39% so far this year.
