Tag Archives: wdc

Western Digital Shareholders Expected To Approve Deal For SanDisk

Western Digital ( WDC ) shareholders likely will approve the company’s $19 billion offer to acquire SanDisk ( SNDK ), says RBC Capital Markets. The vote among Western Digital shareholders is set for March 15. A definitive agreement between the two companies was reached on Oct. 21. “Given our analysis of the top 20 Western Digital shareholders and our discussions with a large number of investors, we think the probability is higher the deal gets approved vs. not,” wrote RBC analyst Amit Daryanani in a research note Monday. He said 15 of the top 20 Western Digital shareholders also own SandDisk stock, making the potential approval likely. The deal came into question late last month, when China-based conglomerate Unisplendour canceled plans to acquire a 15% stake in the disk drive maker for about $3.8 billion, on fears U.S. regulators would scuttle the deal due to national security concerns. Western Digital plans to acquire SanDisk, a leading provider of flash-memory chips used in smartphone and tablets, in a cash-and-stock transaction that was valued at $86.50 a share, or about $19 billion, when the deal was announced. After the Chinese investor pulled out, Western Digital went to its alternative offer, which it says values SanDisk at $78.50 a share. Western Digital anticipates seeing $500 million in total cost synergies, not including tax savings, from the acquisition. Daryanani rates Western Digital stock outperform, with a price target of 68. Western Digital stock was up more than 3%, near 50.50, in midday trading Monday, but its shares were near 72 when it announced the pending acquisition. SanDisk stock was up nearly 1%, near 76.50, in midday trading in the stock market today . Image provided by Shutterstock .

Does Tsinghua’s Western Digital Exit Threaten A Micron-China Tie?

Regulators’ decision to investigate Tsinghua Holdings’ now-defunct $3.8 billion investment in Western Digital ( WDC ) could signal “a heightened sense of scrutiny on all Chinese investments in U.S. technology,” a Macquarie analyst wrote Tuesday. That’s sure to frustrate Micron Technologies ( MU ) which, analysts say, could be examining a joint venture with a Chinese partner. Last year, Micron reportedly rebuffed a $23 billion bid from Tsinghua Holdings’ chip-arm, Tsinghua Unigroup. MKM analyst Ian Ing says Micron could seek to become a “ local supplier ” for the Chinese memory market by entering a JV. A JV stands a better chance of getting approval from the Committee on Foreign Investment in the United States. But the CFIUS is increasingly wary of Chinese investments in U.S. technology, Macquarie analyst Deepon Nag wrote in a research report. Tsinghua Unigroup plans to invest $47 billion to oust Apple ( AAPL )-supplier Qualcomm ( QCOM ) from its No. 3 chipmaking slot. “We see increased risk that Chinese investment in U.S. semiconductor assets won’t be allowed to take place, which we believe is an incremental negative for Micron,” Nag wrote. Unisplendour Playing For SanDisk? Early Tuesday, Tsinghua Holdings subsidiary Unisplendour pulled its $3.8 billion funding in Western Digital after CFIUS regulators decided to investigate the investment. Nag sees little chance of IP theft in such a “passive investment,” but other analysts have suggested that Unisplendour was making a play for SanDisk ‘s ( SNDK ) coveted Nand technology. Western Digital announced its plan to acquire SanDisk a month before Unisplendour was to invest the $3.8 billion for a 15% stake in Western Digital. “Tsinghua put $3.8 billion in Western Digital so they would have SanDisk technology,” Summit Research analyst Srini Sundararajan told IBD in December. On Wednesday, Sundararajan said the Western Digital-SanDisk deal would proceed without Unisplendour. It’s a marriage of “necessity and convenience,” he wrote in a report. Western Digital investor Alken Asset Management opposes the transaction , claiming the price is too high and SanDisk faces an uphill Nand battle, but the objection “comes a bit late.” Toshiba and SanDisk have made rapid progress in 3D Nand, Sundararajan says. And SanDisk has “gobs of Nand IP” plus licensing sales to justify the price. Western Digital cut the price Tuesday after Unisplendour’s exit to about $78.50 per share. Shareholders are set to vote on the transaction March 15. If it fails, Western Digital will have to pay a $184 million fee. “We find that net-net most of the objections expressed by Alken, while legitimate, ignore the strategic importance to Western Digital of having a captive Nand source as well as in-house Nand IP and a well-trained group of Nand experts,” Sundararajan wrote. Will Western Digital Cut Its SanDisk Bid? But Nag says the Unisplendour exit gives Western Digital the opportunity to reduce or completely drop the SanDisk deal. Out of 280 tech M&A deals in the past 30 years, nearly 10% were ultimately revised downward, he wrote. And considering Western Digital’s slough in stock price — down 43.5% since the deal was announced — the acquisition will likely be dilutive, Nag wrote. On Tuesday, RBC Capital Markets analyst Amit Daryanani estimated that the transaction would be 34% dilutive without the Unisplendour investment. “As a result, we believe that Western Digital will be highly motivated to renegotiate the price of SanDisk lower,” Nag wrote. On the stock market today , SanDisk stock rebounded 4.9% to close at 69.90, after closing down 1.6% on Tuesday. Western Digital stock rose 2.7% vs. a 7.2% decline Tuesday.

China Yanks Western Digital Funds On U.S. Probe; SanDisk Deal At Risk

China’s Tsinghua Holdings pulled its $3.8 billion investment in Western Digital ( WDC ) early Tuesday amid a U.S. government inquiry, prompting the disk drive maker to slash its already threatened bid for flash memory maker SanDisk ( SNDK ). The SanDisk acquisition, announced Oct. 21, will have to hurdle a Western Digital shareholder vote, which would not have been required with the investment by Tsinghua subsidiary Unisplendour. Western Digital stock sank 7.2% to 42.77 on the stock market today , while SanDisk stock lost 1.6% to 66.61. Western Digital Investor Opposes Bid On Monday, Western Digital investor Alken Asset Management wrote an open letter claiming the $19 billion offer for SanDisk was “simply too high.” SanDisk, an Apple ( AAPL ) supplier, faces competitive headwinds in 2016. Alken owns about 2% of Western Digital stock. The vote is slated for March 15. The Unisplendour investment would have given it a 15% stake in Western Digital. Unisplendour terminated its Western Digital investment after the Committee on Foreign Investment in the U.S. said it would investigate. Neither Western Digital nor Unisplendour will pay a termination fee. In December, Summit Research analyst Srini Sundararajan told IBD that Tsinghua Holdings was trying to get its hands on SanDisk technology. Chip-arm Tsinghua Unigroup plans to invest $47 billion in semiconductor technology to become the world’s No. 3 chipmaker, leapfrogging  Qualcomm ( QCOM ). It wouldn’t be the first time a Tsinghua Holdings bid for U.S. technology was shuttered on regulatory concerns. A rumored $23 billion bid for Micron Technologies ( MU ) by Tsinghua Unigroup seemingly fell flat last year on worries that CFIUS would stop the deal. Micron shares fell 5.1% to 10.49. SanDisk Acquisition Remains ‘Compelling’ By terminating its Western Digital investment, Unisplendour triggered an alternative deal between Western Digital and SanDisk. Western Digital will now pay $67.50 per share in cash and 0.2387 in stock for SanDisk, for a value near $78.50 per share at Western Digital’s Monday closing price. The original deal valued SanDisk at 86.50 a share. Despite the failed Unisplendour bid, the demand for data storage is rising, Western Digital CEO Steve Milligan said Tuesday in a statement. By acquiring SanDisk, Western Digital would get easy access to Nand (flash memory). “We believe the strategic rationale of this acquisition is even more compelling today than when we first announced it in October last year, given industry trends and strong execution by both companies,” Milligan said in the statement. The SanDisk deal has been expected to close in Q2. Western Digital said it continues to see $500 million in synergies within 19 months of the closure and $1.1 billion by 2020. If the deal fails, Western Digital must pay SanDisk $184 million. Toshiba Could Benefit Western Digital RBC analyst Amit Daryanani sees the Western Digital-SanDisk deal being 34% dilutive without the Unisplendour investment. The ongoing shift to 3D Nand has pressured average sales prices for SanDisk’s bread-and-butter Nand business, he wrote in a research report. “While we think the long-term rationale of owning HDD (hard disk drive) and Nand under one umbrella is logical, the near-term implications of this could be negative,” he wrote. Needham analyst Richard Kugele notes the $17 billion debt that Western Digital will incur if it acquires SanDisk. But a partnership with Toshiba via SanDisk could buoy Western Digital. Toshiba manufactures SanDisk’s Nand. “Nothing will change the aggressive nature of the Nand industry, but partially owning a fab through the Toshiba partnership should help Western Digital over time navigate those waters,” Kugele wrote in a research report. Daryanani rates Western Digital stock outperform and has a 68 price target. Kugele rates Western Digital stock a strong buy and has a 90 price target.