Western Digital buying Hitachi unit for $4.3 billion
Western Digital Corp., the world’s largest maker of hard drives, on Monday said it is buying Hitachi Global Storage Technologies, the third largest, for $4.3 billion in cash and stock.
The move comes as traditional, spinning hard drives are beginning to see serious competition from solid-state flash memory. Tablets and smart phones, which use flash memory, are starting to overshadow computers, which mostly still use hard drives.
Irvine, California-based Western Digital said that the deal includes $3.5 billion in cash, plus 25 million of its common shares. The stock is valued at $750 million based on the company’s Friday closing stock price of $30.01.
After the closing of the deal, Hitachi Global Storage’s parent, Hitachi Ltd., will own about 10 percent of Western Digital. Two of the company’s executives will also join Western Digital’s board.
Japan-based Hitachi Ltd. makes a huge array of products from nuclear power plants to rice cookers. It has been reshaping its business, cutting jobs, closing plants and shedding segments, helping some money-losing businesses such as auto parts and digital media rebound into the black.
Hitachi bought the disk drive unit from IBM Corp. in 2002. It’s still based in San Jose, California, and has a factory there and in Rochester, Minnesota. It also has factories in China, Japan, Malaysia, the Philippines, Singapore and Thailand. It has 35,000 employees in all.
Steve Milligan, president and CEO of Hitachi Global Storage, will join Western Digital after the transaction’s completion. He will report to Western Digital CEO John Coyne.
Both companies’ boards have approved the acquisition, which is expected to close in the third quarter.
Western Digital said it plans to pay for the buyout with existing cash and about $2.5 billion in total debt.
The acquisition is expected to immediately add to Western Digital’s adjusted earnings per share.
Seagate Technology PLC is the second-largest maker of hard drives. Together, Western Digital and Hitachi will be nearly twice as large as Seagate, by number of units shipped, according to research firm iSuppli.
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