The world’s No. 2 maker of hard disk drives (HDDs), Western Digital Corp., and Komag, Inc., a leading producer of optical media platters for hard drives, announced on Thursday that the two companies have entered into a definitive agreement for WD to acquire Komag for $32.25 in cash per share for a value of approximately $1 billion.

“This acquisition is a significant step in the evolution and differentiation of WD as a leader in the worldwide hard drive industry. Following the successful integration of the Read-Rite head assets since 2003, we are very excited by the opportunity to drive incremental profitability and efficiencies in the WD business model through the full integration of Komag’s media operation,” said John Coyne, WD president and chief executive.

The transaction will be structured as a cash tender offer for all the outstanding shares of Komag common stock, followed by a merger of a wholly-owned subsidiary of WD into Komag in which the remaining shareholders of Komag will receive $32.25 in cash. The transaction has been unanimously approved by the board of directors of each company and is subject to customary closing conditions, including regulatory approvals, and is expected to close in the third calendar quarter of 2007. WD will fund the transaction, including the expected retirement of Komag’'s convertible notes due 2014, through a combination of the companies’ cash and proceeds from a senior secured term loan of up to $1.25 billion.

The acquisition of Komag will further strengthen WD’s position as a highly-efficient hard drive maker by integrating media, one of the critical technology components of a hard drive.

“This acquisition will enable WD to optimize synergies through the integration of heads and media, secure our long-term supply of media, and sharpen our ability to deliver high quality, highly reliable and cost-effective products to our customers. We believe that Komag’s highly-skilled employees, an industry-leading position with perpendicular magnetic recording media, and its operational excellence will further strengthen WD’s competitive position. Together, we have the right team to deliver on WD's strategy to achieve profitable growth,” said Mr. Coyne.