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WD to snap up SanDisk for US$19 billion

by Stuart Wilson, Wednesday 21 October 2015

Storage giant Western Digital (WD) will splash out US$19 billion in cash and stock to snap up flash memory specialist Sandisk. WD claims that the deal is the next step in the transformation of WD into a storage solutions company with global scale, extensive product and technology assets, and deep expertise in non-volatile memory (NVM).

With this transaction, WD will double its addressable market and expand its participation in higher-growth segments. SanDisk brings a 27-year history of innovation and expertise in NVM, systems solutions and manufacturing. The combination also enables WD to vertically integrate into NAND, securing long-term access to solid state technology at lower cost.

Steve Milligan, CEO at WD, said: "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. The combined company will be ideally positioned to capture the growth opportunities created by the rapidly evolving storage industry. I’m excited to welcome the SanDisk team as we look to create additional value for all of our stakeholders, including our customers, shareholders and employees."

Sanjay Mehrotra, president and CEO at SanDisk, added: "Western Digital is globally recognised as a leading provider of storage solutions and has a 45-year legacy of developing and manufacturing cutting-edge 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 industry-leading, innovative storage solutions to customers across a wide range of markets and applications."

WD and SanDisk’s complementary product lines, including hard disk drives (HDDs), solid-state drives (SSDs), cloud data centre storage solutions and flash storage solutions, will provide the foundation for a broader set of products and technologies from consumer to data centre. Both companies have strong R&D and engineering capabilities and a rich base of fundamental technologies with over 15,000 combined patents issued or pending worldwide.

Toshiba has been a long-term strategic partner to SanDisk for 15 years. The joint venture (JV) with Toshiba will be ongoing, enabling vertical integration through a technology partnership driven by deep collaboration across design and process capabilities. The JV provides stable NAND supply at scale through a time-tested business model and extends across NVM technologies such as 3D NAND.

Steve Milligan will continue to serve as CEO of the combined company, and the company will remain headquartered in Irvine, California. Upon closing, Sanjay Mehrotra is expected to join the WD board of directors.

WD has a strong track record of integrating acquisitions to create value. The company expects to achieve full annual run-rate synergies of $500 million within 18 months post-closing. The transaction is expected to be EPS accretive on a non-GAAP basis within 12 months of the transaction close. Pending the closing of the transaction, WD expects to continue paying its quarterly dividend and plans to suspend its share buyback programme.

The transaction will be financed by a mix of cash, new debt financing and WD stock. In connection with the transaction, WD expects to enter into new debt facilities totaling US$18.4 billion, including a US$1 billion revolving credit facility.

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