Completion in the Second Half of Next Year... Stock Price Soars 7% After Announcement
"Appropriate Next Step Considering Current Pharmaceutical Situation"
U.S. semiconductor company Western Digital announced on the 30th (local time) that it will spin off its flash memory business division, causing its stock price to surge more than 7% in a single day. This came just three days after news broke that merger talks with Japanese semiconductor company Kioxia had been halted.
According to the Wall Street Journal (WSJ) and others, Western Digital announced on the same day that it would separate its hard disk drive (HDD) business and flash memory business, spinning off the flash memory division. The split is expected to be completed by the second half of next year.
This decision was made immediately after reports emerged that Western Digital had suspended merger discussions with Kioxia.
On the 27th, Japanese media such as Nihon Keizai Shimbun reported that negotiations for a business integration between Western Digital and Kioxia had been halted. The talks failed because they could not obtain consent from SK Hynix, which has an indirect stake in Kioxia, and also could not narrow differences on several conditions with Bain Capital, Kioxia’s largest shareholder.
As the merger became difficult, Western Digital appears to have ultimately decided to pursue the business split option it had been considering.
Western Digital, which has focused on the HDD business, acquired SanDisk in 2016 for $19 billion (approximately 25.65 trillion KRW) and has operated the flash memory business since then. The goal was to expand its memory semiconductor product lineup, but activist investor Elliott Management, which holds about a 6% stake in Western Digital, pressured the company last year to consider spinning off the flash memory business, and the company has been reviewing this option. This pressure increased especially due to the downturn in the memory market that began last year.
David Goeckler, CEO of Western Digital, stated, "Considering the constraints at this point, the board has recently determined that spinning off the business is the appropriate next step," adding that the memory semiconductor industry is gradually recovering from the downturn and that market conditions are expected to improve during the current fiscal year.
Following the announcement of the business split and spin-off, Western Digital’s stock closed at $41.80 on the New York Stock Exchange that day, up 7.26%. After market close, the stock price fell more than 5%, reducing the gains.
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