Western Digital and Hitachi, Ltd. announced today that they have entered into a definitive agreement whereby WD will acquire Hitachi Global Storage Technologies (Hitachi GST), a wholly-owned subsidiary of Hitachi, Ltd., in a cash and stock transaction valued at approximately $4.3 billion. The proposed combination will result in a customer-focused storage company, with significant operating scale, strong global talent and the industry’s broadest product lineup backed by a rich technology portfolio.
Under the terms of the agreement, WD will acquire Hitachi GST for $3.5 billion in cash and 25 million WD common shares valued at $750 million, based on a WD closing stock price of $30.01 as of March 4, 2011. Hitachi, Ltd. will own approximately ten percent of Western Digital shares outstanding after issuance of the shares and two representatives of Hitachi will be added to the WD board of directors at closing. The transaction has been approved by the board of directors of each company and is expected to close during the third calendar quarter of 2011, subject to customary closing conditions, including regulatory approvals. WD plans to fund the transaction with a combination of existing cash and total debt of approximately $2.5 billion.
WD expects the transaction to be immediately accretive to its earnings per share on a non-GAAP basis, excluding acquisition-related expenses, restructuring charges and amortization of intangibles.
The resulting company will retain the Western Digital name and remain headquartered in Irvine, California. John Coyne will remain chief executive officer of WD, Tim Leyden chief operating officer and Wolfgang Nickl chief financial officer. Steve Milligan, president and chief executive officer of Hitachi GST, will join WD at closing as president, reporting to John Coyne.
“The acquisition of Hitachi GST is a unique opportunity for WD to create further value for our customers, stockholders, employees, suppliers and the communities in which we operate,” said John Coyne, president and chief executive officer of WD, in the press release. “We believe this step will result in several key benefits—enhanced R&D capabilities, innovation and expansion of a rich product portfolio, comprehensive market coverage and scale that will enhance our cost structure and ability to compete in a dynamic marketplace. The skills and contributions of both workforces were key considerations in assessing this compelling opportunity. We will be relying on the proven integration capabilities of both companies to assure the ongoing satisfaction of our customers and to bring this combination to successful fruition.”
“This brings together two industry leaders with consistent track records of strong execution and industry outperformance,” said Steve Milligan, president and chief executive officer, Hitachi Global Storage Technologies, in the press release. “Together we can provide customers worldwide with the industry’s most compelling and diverse set of products and services, from innovative personal storage to solid state drives for the enterprise.”
Hiroaki Nakanishi, president, Hitachi, Ltd. said in the press release, “As the former CEO of Hitachi GST, I always believed in the potential of Hitachi GST to become a larger and more agile company. This is a strategic combination of two industry leaders, both growing and profitable. It provides an opportunity for the new company to increase customer and shareholder value and expand into new markets. Additionally, it is important to us that WD shares common values with Hitachi GST to create a more global company that is well positioned to define a broader role in the evolving storage industry.”
WD’s exclusive financial adviser on the transaction is Bank of America Merrill Lynch; its lead legal adviser is O’Melveny & Myers LLP. Goldman, Sachs & Co serves as financial adviser to Hitachi, Ltd. and Hitachi GST. Legal advisers to Hitachi, Ltd. and Hitachi GST are Morrison Foerster LLP and Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates, respectively.
Source: Western Digital Corporation
Any word on what zune tang thinks of this??
I sure hope they don’t screw up G-Technology with PLASTIC as is the default for WD. I am buying a couple drives before they become PLASTIC.
http://www.g-technology.com/
Damn! I have avoided Western Digital hard drives and preferentially chosen Hitachi drives ever since Hitachi GST bought IBM’s hard drive business back in 2003 — with absolutely no regrets. While Hitachi drives were more expensive, in my experience they were also much more reliable. I hope WD’s takeover doesn’t change that.
I look forward to the day (maybe in the next 10 years?) when SSDs are as big and inexpensive as their spinning-platter fore-bearers!
I don’t like Hitachi hard drives. The one I had died on me and I almost lost everything. I’ve been using Seagate ever since but have heard pretty good things about Western Digital. Was thinking of making WD my next laptop hard drive purchase.
I’m with you DataDude. I have stayed away from WD for years now, and in the last 18 months, have come to rely on Hitachi. This just doesn’t seem like good news.
The statements by John Coyne,Steve Milligan,and Hiroaki
Nakanishi are priceless. Superb examples of business
BS. From this one would think that the future is unlimited.
Another Apple Inc. in birth. Consumer data storage are
all moving to solid state/hard disc drive is past history.
This new company might have a niche in providing cheap
giant storage capacity for commercial use.
Truly. Of course they never said those things. A marketing wonk wrote it for the press release. It’s always predictable too. Had Microsoft written it, it would go like this, “The acquisition of Hitachi GST is a unique opportunity for Microsoft to create further value for our customers and the communities in which they care about the most.”
I’ve had good experience with WD hard drives.
So, WD is essentially buying IBM’s old hard drive business.
Not good for the consumer.
How can this be good news? It’s just another corporate merger aimed at increasing profits by eliminating competition. The claim that the resulting company will be “customer-focused” is pure, undadultered hogwash.
glad I got my GDrive before WD ruins them. Every WD drive I’ve had lasts no more than 2 years. Crap, absolute crap.
That would have been pocket change for AAPL. Which begs the question: When will AAPL just buy their own flash storage company?
WD drives are crap.
One less major competitor in the HDD business. Now Seagate, WD, and Samsung? Any others I left out?
Toshiba
Guys — all hard drives die. Some die in batches. Some models are worse than others.
Even if you run a datacenter, you are unlikely to be able to discern a brand difference. I’ve had Hitachi, WD, Seagate drives die. I’ve had an Intel SSD die on me.
Just relax. It’s a stupid discussion.
Hitachi purchased G-Technology a couple of years ago, when G-Tech was a very solid drive company with a good focus on the Macintosh market. The ensuing restructuring was a nightmare for resellers and I’m sure for customers as well. G-Tech was using exclusively Hitachi drives, which provided good performance, reliability, and consistency.
It took nearly a year for them to get their act together and get back to having product availability, either direct or through distribution. Tech support to get either a firmware update (which was PC only) or to get an RMA became an exercise in futility. They have finally gotten back to a decent company to deal with (although we deal primarily with distributors) but the products are available for the most part and still pretty reliable. Why can’t companies stay small, agile and focused on customer service and quality. I’m very skeptical that this move is going to be good for anyone unless they leave the G-Tech line alone, and continue to use the manufacturing process for Hitachi drives. We have had good luck with some of the WD drives, particularly the black series, but Hitachi drives have some of the best MTBF (Mean Time Before Failure) in the industry, which is why they cost a little more. We have a fair number of customers using the G-safe and G-speed drive arrays, and I sure hope we don’t have to go through another year of restructuring and product shortages.