Chinese company buys nearly $4-billion stake in Western Digital
A unit of China’s Tsinghua Unigroup Ltd. agreed to pay $3.78 billion for a 15% stake in Western Digital Corp., an Irvine-based maker of data-storage disk drives, the companies said Wednesday.
The deal marked the latest effort by the state-controlled Chinese company to expand its overseas holdings, while also giving Western Digital a cash infusion to aid its growth.
Tsinghua’s Unisplendour Corp., known as Unis, agreed to pay $92.50 each for newly issued Western Digital shares, a 34% premium to Western Digital’s closing price Tuesday of $68.87 a share.
In response to the announcement, Western Digital’s stock jumped $10.57, or 15.4%, to $79.44 a share in trading Wednesday.
“The equity investment by Unis will help facilitate our growth,” Western Digital Chief Executive Steve Milligan said in a statement.
Weiguo Zhao, chairman of Tsinghua Unigroup and Unisplendour, in turn praised Western Digital for having “a capable and talented management team and workforce.”
Western Digital has about 76,500 employees and the company generated revenue of $14.6 billion in its fiscal year ended July 3.
But it has grappled with slowing growth in some markets, such as personal computers, and its stock had tumbled 38% so far this year before Wednesday’s announcement.
Tsinghua Unigroup this summer reportedly was preparing an offer of about $23 billion to acquire Micron Technology Inc., a leading U.S. semiconductor maker.
But that deal never materialized amid speculation that it would have hit strong U.S. opposition, partly over concerns about U.S. national security.
Unisplendour’s deal with Western Digital also is likely to be reviewed by the Committee on Foreign Investment in the United States, an interagency panel led by the Treasury Department, for any national security implications.
But Unisplendour is seeking a minority stake in Western Digital, not control. The deal also gives Unisplendour the right to nominate one director to Western Digital’s board, which currently has nine members.
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