Western Digital in talks to merge with Japan's Kioxia -source
U.S.-based Western Digital Corp is in advanced talks on a possible US$20 billion stock merger with Japanese chipmaker and partner Kioxia Holdings Corp, a person familiar with the matter told Reuters.
The companies could reach an agreement as early as mid-September, and Western Digital Chief Executive Officer David Goeckeler would run the combined firm, said the source, who requested anonymity to discuss confidential matters.
The Wall Street Journal reported the talks earlier on Wednesday.
A combination of the two would create a firm with market share equaling leader Samsung Electronics Co Ltd and rewrite the competition to capture robust demand driven by new smartphone launches, 5G expansion and a pandemic-fueled rise in work from home.
While Samsung dominates with over a third of the NAND market, according to research firm TrendForce, Kioxia has a nearly 19per cent share and Western Digital 15per cent. South Korea's SK Hynix Inc and U.S. firms Micron Technology Inc and Intel Corp are the other large players.
"Such a deal would be a defensive, but prudent, move by Western to reinforce its competitive position in the swiftly consolidating chip market," Morningstar analyst William Kerwin said in a research note.
"In the long term, we expect the NAND market to ... consolidate down to about three leading players for a largely commodity-like product," Kerwin said.
The memory chip industry is already consolidating, with Hynix agreeing to buy Intel's NAND business for US$9 billion last year, a deal still awaiting anti-trust clearance.
A Western Digital-Kioxia merger is also likely to draw anti-trust scrutiny in several countries, including in the United States, Europe and China.
Monopoly concerns and a years-long trade conflict between the United States and China have scuppered deals in the past few years.
Qualcomm Inc, for instance, walked away from a US$44 billion deal to buy NXP Semiconductors after failing to secure Chinese regulatory approval in 2018, and Nvidia Corp's planned US$40 billion acquisition of British chip designer ARM hit a major hurdle last week in the UK.
KIOXIA OWNERS
Kioxia told Reuters it does not comment on market rumors or speculation. It said it was considering appropriate timing for an IPO. Western Digital said it does not speculate on merger activity.
In Japan, the two companies jointly produce NAND chips, which don't need power to retain data and are used in smartphones, TVs, data center servers and public announcement display panels.
"For privately held Kioxia, we think US$20 billion or more would secure a solid return," Kerwin said.
Kioxia, sold by Toshiba Corp in 2018 to a consortium led by Bain Capital for US$18 billion as Toshiba Memory Corp, shelved plans last year for what would have been Japan's largest initial public offering in 2020.
Toshiba still owns about 40.6per cent of Kioxia, according to its 2020 annual report. Toshiba's shares were flat on Thursday in early trade.
Toshiba said it was not involved in the management of Kioxia and not in a position to comment. It said it continues to consider the most appropriate approach to its investment in Kioxia to maximize shareholder value.
Bain was not immediately available for a comment.
An IPO is still a possibility should Kioxia fail to reach a deal with San Jose, California-based Western Digital, the source told Reuters. Financial magazine Diamond in June said Kioxia was planning an IPO as early as September.
Western Digital's shares rose by as much as 15per cent on Wednesday and they closed up 7.8per cent, giving it a market capitalization of more than US$20 billion.
Source: www.channelnewsasia.com
