21-10-2015, 15:16 #1
[EN] Western Digital To Buy SanDisk In $19B Bid For Flash Memoryby Lindsey O'Donnell on October 21, 2015
Hard-drive vendor Western Digital Wednesday agreed to buy SanDisk in a cash-and-stock $19 billion deal, as the evolving storage industry focuses more on flash memory storage chips over magnetic disks.
SanDisk's flash memory chip portfolio will give Western Digital an advantage as the traditional hard-disk-drive storage industry struggles to keep up with a broader set of mobile products including tablets and smartphones.
"This transformational acquisition aligns with our long-term strategy to be an innovative leader in the storage industry by providing compelling, high-quality products with leading technology," said Western Digital CEO Steve Milligan in a statement. "The combined company will be ideally positioned to capture the growth opportunities created by the rapidly evolving storage industry."
Like many other storage vendors, Irvine, Calif.-based Western Digital is struggling with its hard-disk-drive business due to the popularity of tablet computers and smartphones. These mobile devices store data on flash memory chips, as opposed to the traditional hard disk drives, which are more popular on laptops.
However, Milpitas, Calif.-based SanDisk's portfolio, which includes mobile solutions such as iNAND embedded flash products for tablets, multimedia players and smartphones, could help Western Digital keep up with the mobile explosion's impact on the storage industry.
Western Digital's core business revolves around internal hard drives and external storage. While solid-state drives are for the most part less expensive than flash drives, NAND technology has better performance and reliability capabilities, and are increasingly being used in hard drives in computing.
"This is a deal I would expect, since Western Digital has been strong in the traditional hard-disk-drive space for many years, but has not been as active in the NAND storage business, which is the future direction for most storage," Randy Copeland, president and CEO of Velocity Micro, a Western Digital system builder partner based in Richmond, Va., told CRN. "SanDisk has a strong foothold in the NAND storage business, but it is increasingly becoming a commodity business now too, so they can leverage the scale and business relationships that Western Digital has cultivated over many years to win new business."
"Given our longstanding partnership with Western Digital, I am sure we will give their SSD products a hard look when we didn't really spend much time considering SanDisk for our PC and other products recently," he added.
Western Digital shares slipped 2.5 percent to $73 in pre-market trading, while SanDisk shares rose 5.7 percent to $79.50 pre-market.
The acquisition comes weeks after Unisplendour, a subsidiary of China-based company Tsinghua Unigroup, acquired a 15 percent stake  in Western Digital.
Western Digital's planned acquisition of SanDisk comes as the semiconductor industry faces a wave of consolidation . In the past year, slowing growth and rising costs drove larger deals in the chip industry, such as Intel's planned $16.7 billion acquisition of Altera, and Avago Technologies' $37 billion buyout of Broadcom.
Semiconductor manufacturer Lam Research Wednesday said it will acquire chip maker KLA-Tencor in a $10.6 billion deal.
21-10-2015, 15:19 #2
Western Digital to buy SanDisk in $19 billion deal(Reuters) - Hard-disk drive maker Western Digital Corp said it would buy SanDisk Corp for about $19 billion, giving it better access to flash memory storage chips used in smartphones and mobile devices.
SanDisk's shares rose to $78.76 in premarket trading, but were well below the cash-and-stock offer of $86.50 per share.
Shareholders are probably disappointed because they were likely looking for a 52-week high takeout price, Wedbush Securities analyst Betsy Van Hees said.
The semiconductor industry has seen a record number of deals this year as demand for cheaper chips and products to power Internet-connected gadgets push technology companies to consolidate suppliers.
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.
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 [TSHUAA.UL], in Western Digital.
The deal is expected to draw intense scrutiny from both U.S. and Chinese regulators as accusations of cyber snooping increase between the two countries.
If the Unisplendour investment closes before the SanDisk acquisition, Western Digital will pay $85.10 in cash and 0.0176 of its shares for each SanDisk share held, the companies said on Wednesday.
However, if the Unisplendour investment does not close or is terminated, Western Digital will pay $67.50 in cash and 0.2387 of its shares for each SanDisk share held.
SanDisk may also need Toshiba Corp's <6502.T> approval to consummate the deal, as it uses the Japanese conglomerate's foundries for making chips, apart from having an important intellectual property-sharing joint venture.
The JV with Toshiba will be ongoing, Sandisk and Western Digital said in a statement.
The deal is expected to add to Western Digital's adjusted earnings within the first 12 months of its closing.
The company said it expected to enter into new debt facilities totalling $18.4 billion, including a $1.0 billion revolver, a portion of which will be used to fund the deal.
Western Digital's shares were down 2 percent at $73.25 in premarket trading.
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.
(Reporting by Abhirup Roy and Devika Krishna Kumar in Bengaluru; Editing by Don Sebastian and Anil D'Silva)
21-10-2015, 15:22 #3
Sandisk, Toshiba Enter New Y2 Facility AgreementSandisk (NASDAQ: SNDK) disclosed the following on Wednesday:
Item 1.01 Entry Into a Material Definitive Agreement
On October 20, 2015, SanDisk Corporation (“SanDisk”) entered into a New Y2 Facility Agreement (the “Agreement”) by and among SanDisk, several wholly owned SanDisk subsidiaries, Toshiba Corporation (“Toshiba”) and their semiconductor manufacturing joint ventures, Flash Partners, Ltd. (“Flash Partners”), Flash Alliance, Ltd. (“Flash Alliance”) and Flash Forward, Ltd. (‘Flash Forward,” together with Flash Partners and Flash Alliance, “Flash Ventures”) setting forth their agreement regarding the construction and operation of a new 300-millimeter wafer fabrication facility in Yokkaichi, Japan, referred to as “New Fab 2.” The primary purpose of New Fab 2, which is located adjacent to the fabrication facilities in Yokkaichi currently utilized by Flash Ventures, is to provide cleanroom space to transition the parties’ current 2-dimensional NAND manufacturing capacity to 3-dimensional NAND (“3D NAND”) beginning in 2016. The Agreement establishes terms for the manufacture of NAND in New Fab 2 and amends the existing agreements governing Flash Ventures to provide for their use of New Fab 2 and for the manufacture of 3D NAND in the other Yokkaichi fabrication facilities, as well.
Toshiba owns and is funding the construction of New Fab 2. The shell was built in one phase, and the cleanroom is being built in three phases of similar size. Equipment installation in the first phase of the cleanroom began in October 2015.
Under the Agreement, SanDisk is committed to 50% of New Fab 2’s start-up costs, as well as 50% of the initial production ramp in New Fab 2. SanDisk’s share of the initial commitment is expected to result in equipment investments and start-up costs totaling approximately $600 million, to be incurred primarily through 2016. SanDisk is also required under the Agreement to prepay approximately $42 million in October 2015 toward the New Fab 2 building depreciation, to be credited against future wafer charges. SanDisk expects to fund its portion of the initial commitment and building depreciation prepayment with cash as well as through other financing sources. Beyond the initial commitment, each of Toshiba and SanDisk has some flexibility as to the extent and timing of its participation in any 3D NAND transitions or capacity expansions using New Fab 2.
In connection with their entry into the Agreement, SanDisk and Toshiba have also agreed to, among others, (i) extend the term of Flash Partners to December 31, 2029, (ii) undertake certain commitments to promote information security and (iii) mutually contribute to, and indemnify each other and Flash Ventures for, certain environmental remediation costs or liabilities resulting from New Fab 2’s operations.
21-10-2015, 15:34 #4
Western Digital hopes SanDisk's flash memory will boost its declining business
Compounding SanDisk's problems was Apple’s decision to start designing its own controller chips and buying Samsung chips instead of SanDisk’s SSDs.
By Lauren Pollock
Updated Oct. 21, 2015 12:18 p.m. ET
Western Digital Corp. agreed to buy SanDisk Corp. for about $19 billion in cash and stock, a deal that moves the disk drive maker into a faster-growing business that uses chips to store data.
SanDisk is a major supplier of chips known as NAND flash memory—manufactured in a joint venture with Toshiba Corp. —as well as thumb drives and other products that use the chips.
Western Digital, which slightly exceeds Seagate Technology PLC as the No. 1 maker of disk drives, has been facing slowing growth as more mobile devices and some data center equipment have converted to flash memory. The technology is faster, uses less energy and is less prone to failures than spinning disks.
“We recognized the fact that there was an element of the market that we were not able to participate in,” said Steve Milligan, Western Digital’s chief executive officer, in an interview. “For quite a while we’ve been thinking about that.”
SanDisk was thought to be shopping for a buyer as the semiconductor industry rapidly consolidates, and industry watchers had said Western Digital or Micron Technology Inc. would be logical bidders.
The offer values SanDisk at $86.50 a share, a 15% premium to Tuesday’s close. SanDisk shares rose 2.5% to $79.05 following the announcement. The stock was trading under $60 a share earlier this month ahead of media reports about a possible sale.
Western Digital shares were trading at $75, off 14 cents. Its stock has lost about a third of their value so far this year.
Both companies reported better-than-expected results for their latest quarters on Wednesday morning. In separate statements Wednesday, Western Digital previewed stronger-than-expected revenue, and SanDisk logged smaller-than-expected declines in earnings and revenue.
The acquisition comes about three weeks after an arm of China’s Tsinghua Unigroup Ltd. agreed to pay $3.78 billion for a 15% stake in Western Digital, the latest U.S. tech company to scramble for politically connected Chinese partners amid the difficult business environment.
For its part, SanDisk had benefited from the explosive growth in demand for its flash memory chips in products such as smartphones. But its results have lagged recently amid a variety of problems, from product-qualification delays to lower-than-expected sales of enterprise products.
Compounding its problems was Apple’s decision to start designing its own controller chips and buying Samsung chips instead of SanDisk’s SSDs.
Mr. Milligan will serve as chief executive of the combined company, which will be located at Western Digital’s base in Irvine, Calif. Upon closing, SanDisk CEO Sanjay Mehrotra is expected to join the Western Digital board.
Western Digital said the deal is expected to add to earnings within 12 months of closing, and it will achieve annual synergies of $500 million within 18 months. Pending the closing, the company expects to continue paying its quarterly dividend and will suspend its share buyback program.
Western Digital said it would pay $85.10 a share in cash and 0.0176 shares of its stock for each share of SanDisk if the Tsinghua investment closes first. If that deal hasn’t closed or has been canceled, it will pay $67.50 in cash and 0.2387 shares.
This year has been especially busy for deals in the semiconductor industry, coming as the stock market has penalized chip companies that don’t show they can improve profit margins, a tough task in a mature industry subject to fierce price pressure.
Among the deals that have been reached in recent months, Avago Technologies Ltd. offered a rich $37 billion for rival wireless-chip maker Broadcom Corp. , and Intel Corp. agreed to buy Altera Corp. for about $16.7 billion.
Earlier Wednesday, Lam Research Corp. said it agreed to buy KLA-Tencor Corp. for about $10.6 billion, another sign of how slowing growth and rising costs have led to frenetic consolidation.
21-10-2015, 16:16 #5