Western Digital to buy SanDisk

Flash-chipmaker deal put at $19B

Western Digital Corp. agreed to buy SanDisk Corp. for about $19 billion, gaining access to a supply of semiconductors that are at the heart of a fast-growing type of computer storage.

The drive-maker will pay $86.50 a share for SanDisk, including $85.10 a share in cash and 0.0176 of a Western Digital common share, according to a statement Wednesday. SanDisk closed at $75.19 Tuesday in New York, giving the company a market value of $15.4 billion.

SanDisk closed up 1.5 percent to $76.78 in New York trading Wednesday, after climbing to $78.50, its highest intraday price since March. Western Digital was down nearly 5 percent to $71.44.

The acquisition gives Western Digital access to the growing market of NAND flash memory chips, which store data in mobile devices and are increasingly being used in hard drives in computing. Western Digital has seen revenue drop as the market moves away from older hard-disk drives.

“WD had two potential paths. One, they could have remained conservative and bought back a ton of stock,” said Joe Wittine, an analyst at Longbow Research. “They made the more aggressive play.”

SanDisk is one of the largest makers of the NAND flash chips, which use less power and access information faster, making them more beneficial for cloud-computing data centers.

Western Digital, which had a leading 44 percent slice of the market for hard-disk drives in 2014, suffered a sales decline of 4 percent in its most recent financial year as the total diskdrive business shrank to $32.9 billion, according to figures from IDC Corp. The market for NAND flash chips — in which SanDisk in combination with partner Toshiba Corp. was the largest producer — rose to $28.9 billion in 2014.

Western Digital may be using part of the proceeds from Tsinghua University’s agreement to invest $3.8 billion in the company, announced in September. The move by the Chinese state-run entity was a further demonstration of that country’s determination to acquire U.S. technology to help it replace component imports.

The SanDisk deal and Lam Research Corp.’s agreement Wednesday to acquire KLATencor Corp. bring total semiconductor deals announced this year to about $100 billion as companies combine to acquire scale in a slowing market where costs continue to go up.

SanDisk held talks about a deal with Western Digital as well as Micron Technology Inc., people familiar with the matter said last week.

Now, the conversation shifts to Seagate Technology PLC, which also makes hard-disk drives, Wittine said.

“Stay the course and generate cash and buy back a ton of stock or do they explore strategic optionality?” he said.