Western Digital announced it has purchased SanDisk for $19 billion. Western Digital will acquire all of the outstanding SanDisk shares in a combination of cash and stock.
He who holds the NAND stands to make the most profit, and WD’s move solidifies its position in the flash-powered future. The HDD vendors have been struggling for the last several years as the PC market declines and SSDs continue to steal market share. Both Western Digital and Seagate have made significant investments in flash-based technology, with Western Digital scooping up STEC, Virident and Skyera. The only missing component was the ability to manufacture the NAND itself.
NAND fabs have been increasingly developing their lines of end-product SSDs, and vendors such as WD (which have to buy NAND from the fab), cannot match the fabs on pricing or profit margins. The acquisition couldn’t possibly come at a better time for WD, which is purchasing SanDisk when its stock is undervalued. The possibility of a fab sale came to the forefront as SanDisk wildly unperformed over the last several quarters and its stock price plummeted.
Micron was recently approached by Chinese-government backed Tsinghua Unigroup with a buyout offer, but the deal was scuttled due to a likely bar of the transaction by the U.S. government due to national security concerns. Shortly thereafter, a subsidiary of the Tsinghua Unigroup (Unisplendour Corporation) purchased 15 percent of WD, which is more than twice the percentage of stock as the nearest shareholder.
This provided Unisplendour with a position on WD’s board, but not a controlling interest in the company. Many speculated thereafter that Tsinghua Unigroup would attempt to purchase a fab through WD, thus avoiding the regulatory entanglements. That prediction appears to have come to fruition.
Western Digital will pay $85.10 per share in cash and 0.0176 shares of WD common stock per share of SanDisk common stock in the transaction. The pending Tsinghua Unigroup transaction with WD unsurprisingly comes into play. If the Unisplendour transaction has not closed or has been terminated, WD will pay only $67.50 in cash and 0.2387 of WD common stock.
SanDisk has a vast portfolio of flash-related technology as it acquired Schooner, FlashSoft, SMART memory systems, and Fusion-io recently. It also has its budding InfiniFlash offering, which will provide WD with a leading edge all-flash array. WD has been keen to expand into storage systems itself with the release of its Active Archive System, which focuses on cold data storage. The addition of a leading high-performance all-flash array, along with a vast portfolio of SSDs, ULLtraDIMMs, PCIe SSDs, and other products, will solve the flash puzzle nicely.
