Consolidation in the storage industry is speeding up. One week after Dell decides to buy EMC for $67bn, Western Digital is using Unisplendour money to buy SanDisk for $19bn to create an enterprise and consumer flash powerhouse.
Speculation about a SanDisk purchase by Western Digital has been intense, following the $3.8bn Unisplendour investment in Western D.
It's a cash and stock offer, with Western D paying $85.10 per share in cash and 0.0176 shares of Western Digital common stock per share of SanDisk common stock if the Unisplendour transaction takes place before the SanDisk buy closes, but $67.50 in cash and 0.2387 shares of Western Digital common stock per share of SanDisk common stock if the Unisplendour deal is delayed or terminated.
With this acquisition Western Digital says it will double its addressable market and, crucially, "enable Western Digital to vertically integrate into NAND, securing long-term access to solid state technology at lower cost." The SanDisk joint venture with Toshiba remains intact and brings WD NVMe and 3D flash.
Western Digital CEO Steve Milligan stated: "This transformational acquisition aligns with our long-term strategy to be an innovative leader in the storage industry."
SanDisk's president and CEO, Sanjay Mehrotra, has found his white knight after experiencing headwinds in his attempt to expand SanDisk into an enterprise flash supplier. He said: "Joining forces with Western Digital will enable the combined company to offer the broadest portfolio of industry-leading, innovative storage solutions to customers across a wide range of markets and applications."
Steve Milligan stays on as overall CEO. Mehrotra will join Western Digital's board. Milligan "expects to achieve full annual run-rate synergies of $500 million within 18 months post-closing."
Western Digital expects to enter into new debt facilities totalling $18.4bn, including a $1.0bn revolving credit facility. The proceeds from the new debt facilities are expected to be used to pay part of the purchase price, refinance existing debt of Western Digital and SanDisk, and pay transaction-related fees and expenses.
The company said: "Pending the closing of the transaction, Western Digital expects to continue paying its quarterly dividend and plans to suspend its share buyback program."
Both Western Digital and SanDisk boards have approved the deal, which is expected to close in the third 2016 quarter.
Eat your heart out, Seagate boss Steve Luczo. ®
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