The board of directors of Western Digital overwhelmingly approved a plan to separate its HDD and flash divisions, according to the company.
Western Digital indicated that the separation of the company would enable each franchise to execute innovative technology and product development more effectively, capitalize on unique growth opportunities, maintain their respective leadership positions, and operate more efficiently with distinct capital structures. As a result, the company would have two public, independent entities that have a strategic focus on specific markets.
Additionally, the transaction offers strategic alternatives to both businesses. The tax-free separation is anticipated to occur during the latter half of the calendar year 2024.
"Our HDD and Flash businesses are both well positioned to capitalize on the data storage industry's significant market dynamics, and as separate companies, each will have the strategic focus and resources to pursue opportunities in their respective markets," said David Goeckeler, CEO of Western Digital. "Importantly, separating these franchises will unlock significant value for Western Digital shareholders, allowing them to participate in the upside of two industry leaders with distinct growth and investment profiles."
"Each business is in a solid position to succeed on its own, and the actions we are announcing today will further enable each company to drive long-term success in the years to come," Goeckeler continued.
Western Digital has concluded that spinning off its flash business is the best, actionable choice at this time to realize its full value after completing its strategic review and thoroughly evaluating a wide range of options.
"During our strategic review process, we thoroughly evaluated strategic transactions that could be value-creative to Western Digital. However, given current constraints, it has become clearer to the Board in recent weeks, that delivering a stand-alone separation is the right next step in the evolution of Western Digital and puts the company in the best position to unlock value for our shareholders," Goeckeler noted. "Moving forward, as we progress through fiscal year 2024, we see an improving market environment in both businesses, and we will remain open to strategic opportunities that unlock further value in both our HDD and Flash investments and assets."
The final determination to separate will be subject to board approval, the execution of definitive documentation, receipt of opinions or rulings as to the tax-free nature of the transaction, and satisfaction of customary conditions, including effectiveness of appropriate filings with the US Securities and Exchange Commission, the completion of audited financials, and the availability of financing.
Merger talks with Kioxia fail
Prominent NAND flash memory manufacturers Kioxia and Western Digital, the second and fourth-largest, respectively, reportedly intended to merge but ultimately abandoned the idea due to an inability to negotiate satisfactory terms.
Western Digital's performance has taken a serious impact as a result of the sudden decline in market demand and memory oversupply. By combining with Kioxia, it seeks to increase the scope of its operations and bolster its competitiveness. Originally, October was when the two parties planned to complete the merger agreement.
SK Hynix, which has an indirect investment in Kioxia, was opposed to the merger because it feared the combined entity would enhance competition, according to reports. Furthermore, Western Digital and Kioxia's major shareholder, Bei Bain Capital, were unable to reach an agreement and chose to cease merger talks.
