Western Digital will split its flash memory business after failed merger talks with Kioxia
As it grapples with a supply glut, Western Digital will break up its flash memory business by creating two new companies for it to go public, making their shares available to retailers and going public. property. On the other hand, it will keep its traditional hard disk business in its own hands, which meets the demands of Elliott investors.
This decision comes after, due to the aforementioned problem of a flooded market, negotiations on the merger of this company with its manufacturing partner, the Japanese company Kioxia, were stopped last week. These two companies have been negotiating this since 2021, because their merger would create a single company that alone controls a third of the global NAND flash memory market.
However, investors of Kioxia SK Hynix, which is the main manufacturer of memory chips and a rival of both companies, opposed it, writes Reuters citing sources. Western Digital shares rose 10 percent after the announcement about the future business, and investors support the split.
„Given the current limitations, it has become clearer… that delivering self-splitting is the true next step in Western Digital’s evolution“, said the company’s CEO, David Geckeler, today.
The move removes uncertainty about the company’s flash memory, which was created by buying SanDisk in 2016 for as much as $19 billion and serves the smartphone and computer industries.
Demand for flash chips has fallen in the wake of the coronavirus pandemic, leaving the market flooded with supply and increasing pressure on chipmakers to consolidate. Now, one of those problems has been resolved, but Western Digital did not provide further details about the talks with the Kioxia company after the release of its quarterly financial results.
The company director adds that he remains “open to all alternatives that provide superior value” to the planned business separation, which is tax-free and should take place in the second half of 2024.