WD CEO: We ain't getting Unisplendour's $3.8bn. But we'll buy SanDisk anyway

Investor: Give 'em $185m, make 'em go away

Western Digital is facing an investor revolt over its SanDisk buyout and has had the $3.8bn wad it expected from Unisplendour halted by the Committee on Foreign Investment in the United States.

Unis (Unisplendour) is a Chinese corporation, owned by the Tsinghua Unigroup, that proposed to invest $3.8bn in WD thus getting a 15 per cent stake in the business. This became public in September last year.

The two are setting up a joint venture to sell WD Active Archive products in China. This remains on track to become operational by the second calendar quarter of 2016, pending regulatory approvals.

That money would have helped WD buy SanDisk for $19bn, with WD paying $85.10 per share in cash and 0.0176 shares of Western Digital common stock per share of SanDisk common stock.

WD now intends to buy SanDisk by paying $67.50 cash for each SanDisk share plus 0.2387 of a Western Digital share.

So the cash component has reduced from $85/share to $67.50/share while the WD share consideration has increased from 0.0176 to 0.2387, a massive 1,256 per cent rise.

WD CEO Steve Milligan said: "We continue to look forward to our transformational combination with SanDisk and capitalising on the growth opportunities ahead of us as the demand for data storage continues to increase, despite the inability to carry out the equity investment by Unis. We believe the strategic rationale for this acquisition is even more compelling today than when we first announced it in October last year given industry trends and strong execution by both companies.”

Investor revolt

That view is diametrically opposed by Alken Asset Management, which holds more than five million WD shares. It has written to WD’s board saying it is “gravely concerned about the SanDisk acquisition.” This is because “ the price has proven to be simply too high.” Investors generally agree because “Western Digital's stock price, as of Friday (19 Feb), has declined more than 40 per cent since the deal was announced.”

Breaking up is hard to do. Take $185m as consolation

It says:

We therefore intend to vote against the NASDAQ Stock Issuance Proposal at the forthcoming Special Meeting, scheduled to be held on March 15, 2015, and urge you to reconsider and cancel the SanDisk transaction.

Such a cancellation would incur a $185m fee payable to SanDisk: “A relatively small breakup fee. We would certainly support such an action.”

The main reasons it has for opposing the deal are these:

In AAM’s view: “The market now expects the NAND market to be more competitive – and profit more elusive – than at the time the Transaction was originally negotiated. In our view, this change in market dynamics means the price negotiated for SanDisk is significantly too high.”

It emphasises that SanDisk "specifically has suffered significant business challenges recently."

There are further aspects of the deal that AAM doesn’t like, such as WD overstating the synergy benefits and its financial advisors with incentives causing a conflict of interest and casting doubt in what they calculated to be a fair price for the acquisition.

It repeats its view that the deal should be killed:

We urge the Board to consider any and all approaches to cancelling the transaction. … Accordingly, we intend to vote against the transaction by rejecting Proposal 1 at the Special Meeting of Shareholders to be held on March 15, 2015.

That’s five-million-plus shares speaking with what looks like a devastating analysis of the deal and its drawbacks.

Stifel MD Aaron Rakers told subscribers “Western Digital’s press release highlights the company’s optimism over the combined acquisition with an ongoing emphasis on the enterprise SSD market – one of the key points in Alken’s letter to Western Digital yesterday in which it argues that Western Digital is paying a significant premium on non-strategic assets (i.e., non-enterprise accounting for more than 85 per cent of SanDisk’s total 2015 revenue).”

WD in its statement added this thought: ”Western Digital maintains an open dialogue with its shareholders and looks forward to continued engagement with them.”

It sure looks like it’s going to be a most engaging engagement. ®

Other stories you might like

  • How to keep a support contract: Make the user think they solved the problem

    Look what you found! Aren't you clever!

    On Call Let us take a little trip back to the days before the PC, when terminals ruled supreme, to find that the more things change the more they stay the same. Welcome to On Call.

    Today's story comes from "Keith" (not his name) and concerns the rage of a user whose expensive terminal would crash once a day, pretty much at the same time.

    The terminal in question was a TAB 132/15. It was an impressive bit of kit for the time and was capable of displaying 132 characters of crisp, green text on a 15-inch CRT housed in a futuristic plastic case. Luxury for sure, unless one was the financial trader trying to use the device.

    Continue reading
  • Apple kicked an M1-shaped hole in Intel's quarter

    Chipzilla braces for a China-gaming-ban-shaped hole in future results, predicts more product delays

    Intel has blamed Apple's switch to its own M1 silicon in Macs for a dip in sales at its client computing group, and foreshadowed future unpleasantness caused by supply chain issues and China's recent internet crackdowns.

    Chipzilla's finances were robust for the third quarter of its financial year: revenue of $19.2 billion was up five per cent year over year, while net income of $6.8 billion was up 60 per cent compared to 2020's Q3.

    But revenue for the client computing group was down two points. CFO George Davis – whose retirement was announced today – was at pains to point out that were it not for Apple quitting Intel silicon and Chipzilla exiting the modem business, client-related revenue would have risen ten per cent.

    Continue reading
  • How your phone, laptop, or watch can be tracked by their Bluetooth transmissions

    Unique fingerprints lurk in radio signals more often than not, it seems

    Over the past few years, mobile devices have become increasingly chatty over the Bluetooth Low Energy (BLE) protocol and this turns out to be a somewhat significant privacy risk.

    Seven boffins at University of California San Diego – Hadi Givehchian, Nishant Bhaskar, Eliana Rodriguez Herrera, Héctor Rodrigo López Soto, Christian Dameff, Dinesh Bharadia, and Aaron Schulman – tested the BLE implementations on several popular phones, PCs, and gadgets, and found they can be tracked through their physical signaling characteristics albeit with intermittent success.

    That means the devices may emit a unique fingerprint, meaning it's possible to look out for those fingerprints in multiple locations to figure out where those devices have been and when. This could be used to track people; you'll have to use your imagination to determine who would or could usefully exploit this. That said, at least two members of the team believe it's worth product makers addressing this privacy weakness.

    Continue reading

Biting the hand that feeds IT © 1998–2021