Western Digital will split into two independent public companies in the future
Previous reports suggested that, since 2021, Western Digital and Kioxia have been in negotiations concerning the merger of their NAND flash production enterprises. However, these discussions came to a halt due to vehement opposition from SK Hynix, a crucial indirect shareholder of Kioxia. Furthermore, Bain Capital, Kioxia’s primary investor, harbored discrepancies regarding the merger’s terms. The inability to reach a consensus on transactional specifics led the discussions into a stalemate.
Upon releasing its financial statements for Q1 of the fiscal year 2024, Western Digital declared its intention to bifurcate into two independently listed entities, each focusing either on mechanical hard drives or NAND flash operations. This business segregation will transpire in a tax-exempt fashion, anticipated to commence in the latter half of 2024.
David Goeckeler, Western Digital’s Chief Executive Officer, articulated that the managerial cadre undertook a comprehensive appraisal of potential strategic transactions that could augment the company’s value. Given the current constraints, the board of Western Digital has, in recent weeks, gained increasing clarity that segmenting the primary operations of the company is the judicious next step in its evolution, poised to unlock value for its shareholders.
Last year, the investment firm Elliott Management disclosed its acquisition of a stake in Western Digital, approximating $1 billion. They concurrently urged the tech giant to disentangle its pivotal operations. This advocacy initiated a review by Western Digital. With the transaction between Western Digital and Kioxia stagnating, and compounded by issues such as global semiconductor oversupply and lukewarm demand for storage products, Western Digital was impelled to take definitive action under immense pressure.
The fruition of Western Digital’s split hinges on the board’s endorsement, the execution of final documents, receipt of opinions or judgments regarding the tax-exempt nature of the transaction, and the satisfaction of conventional conditions. This encompasses the validity of pertinent documentation submitted to the U.S. Securities and Exchange Commission (SEC), the completion of audited financial reports, and the affirmation of financial wherewithal.