Kioxia and Western Digital speed up merger negotiations

The partnership between Western Digital and Kioxia in the realm of data storage has spanned over two decades, during which they have jointly invested in the research and production of NAND flash memory. Their respective product lines have been intentionally divergent to mitigate any potential competition. As of early this year, it was rumored that negotiations were underway for the merger of their NAND flash memory production businesses. The new entity not only plans to be listed in the United States but also aims for a secondary listing in Japan.

According to Reuters, Western Digital and Kioxia are expediting their merger discussions and formulating pertinent plans. As per TrendForce data, during the fourth quarter of 2022, Kioxia and Western Digital ranked as the second (19.1%) and fourth (16.1%) largest memory manufacturers globally. Should the proposed transaction come to fruition, they would surpass Samsung (33.8%) to ascend to the top spot.

Post-merger, it is understood that Kioxia and Western Digital would hold stakes amounting to 43% and 37% respectively, with the balance held by existing shareholders of both companies. At present, a majority of Kioxia’s shares are held by an investment group led by the private equity firm Bain Capital, although Toshiba still retains a 40.6% stake in Kioxia, thereby ensuring its significant shareholder status in the future entity. Toshiba, currently undergoing restructuring, accepted a buyout offer from Japan Industrial Partners (JIP), a consortium of domestic enterprises, on March 23rd. The public acquisition amount is estimated to be around 15.3 billion USD.

Kioxia had initially planned its Initial Public Offering (IPO) for the fall of 2020. However, due to the widespread impact of the COVID-19 pandemic, deteriorating flash memory market conditions, and the Sino-US trade disputes, the IPO was indefinitely postponed. Opting for a merger with Western Digital also represents a strategy for investors to recoup funds amidst a challenging market characterized by steadily declining memory prices.