Western Digital is making a big buy. The storage solutions company is laying out $19 billion to acquire flash storage pioneer SanDisk Corp. Western Digital is snapping up all outstanding shares of SanDisk for a combination of cash and stock. The deal values the stock at $86.50 per share. The boards of directors of both companies have approved the deal.
Steve Milligan [pictured], CEO of Western Digital, called the acquisition “transformational.” The acquisition aligns with the company’s long-term strategy to drive innovation in the storage industry, he said in a statement. Milligan specifically stressed that the combined company will be “positioned to capture the growth opportunities created by the rapidly evolving storage industry."
Western Digital is positioning the acquisition as the next step in the company’s transformation into a storage solutions company with global scale, broad product and technology assets and non-volatile memory expertise. The transaction immediately doubles Western Digital’s addressable market and expands its competitiveness in higher-growth segments of the storage industry, the company said.
SanDisk brings plenty to Western Digital's transformation possibilities. The company has been plowing in the non-volatile memory storage, systems solutions and manufacturing field for 27 years. The combined company positions Western Digital to vertically integrate into NAND. Ultimately, the buy gives Western Digital long-term access to lower-cost solid state technology, which could serve as a competitive advantage.
We caught up with Rob Enderle, principal analyst at the Enderle Group, to get his thoughts on the big deal. He told us Western Digital and Seagate have been seeing a lot of sales pressure from flash drives -- and Western Digital has moved to address this by buying SanDisk. He said that makes him wonder whether Seagate missed a meeting.
“Now, mergers like this between companies from different periods seldom go well and there is a high risk that Western Digital will damage SanDisk irreparably as a result,” Enderle said. “Be that as it may, this puts a light on Seagate as we wonder what they will do to address the same problem of heavy flash driven erosion of the magnetic disk market.”
In its announcement, Western Digital stressed its “strong track record” of integrating acquisitions to create value. In 2010, the company acquired the magnetic glass media sputtering operations of Hoya Corp. and Hoya Magnetics and in 2011 bought the storage unit of Hitachi Global Storage Solutions for $4.3 billion. Three years later, the firm bought Skyera, a flash-based storage development company.
After the ink dries on the deal, Western Digital said it expected to achieve full annual run-rate synergies of $500 million within 18 months. What’s more, SanDisk’s long-term strategic partnership with Toshiba will continue, which paves the way for Western Digital to tap into a stable NAND memory supply at scale that extends across non-volatile memory technologies like 3D NAND.
Milligan will continue to serve as CEO of the combined company, which will remain headquartered in Irvine, California. Upon closing, Sanjay Mehrotra, SanDisk's co-founder, president and CEO, is expected to join Western Digital’s board of directors.