Western Digital Shares Plunge As Kioxia Deal Falls Apart
Western Digital’s shares have tumbled as much as 16% after deal talks between the digital solution provider and Kioxia Holdings have ceased.
The two businesses were negotiating a merger of their flash memory businesses but faced resistance from SK Hynix, a leading shareholder in Kioxia. SK Hynix challenged the deal because it would devalue its investment in Kioxia.
Even though the deal looks dead in the water now, deal negotiations could resume in the future, according to anonymous sources.
SK Hynix, the second-largest global memory chipmaker, became a stakeholder in Kioxia when it financed a Bain Capital-led consortium buying the memory chip unit from Toshiba Corp. in 2018.
Additionally, SK Hynix planned to back part of its investment with convertible bonds that could give it up to a 15% equity stake in Kioxia.
If Western Digital and Kioxia merged, they would become industry leaders. Though they have been exploring a possible combination for years, the companies have faced obstacles such as control, leadership, economics, and politics.
The companies had expected to conclude the deal by October 30th, when Western Digital reports earnings, which will be impossible now.
Western Digital, based in California, declined to comment. While Kioxia and SK Hynix, both based in Asia, did not respond.