by Anton Shilov
03/08/2012 | 10:39 PM
Western Digital Corp. on Thursday announced that it had completed its acquisition of Hitachi Global Storage Technologies, effective March 8, 2012, for $3.9 billion in cash and 25 million shares of WDC common stock valued at approximately $0.9 billion. Hitachi now owns approximately 10% of WDC shares outstanding, and it has the right to designate two individuals to the board of directors of WD.
By taking over Hitachi GST, WD has acquired a strong presence in the traditional enterprise market, substantially increased its presence in the industry's fastest-growing segments-cloud and mobility-and improved its capability to address new market initiatives such as enterprise SSD, storage solutions for small business and low-profile HDDs and hybrid drives for Ultrabooks. Unfortunately, WD had to sell off some of its factories that produce 3.5" hard disk drives for desktops and for external storage solutions.
"The completion of this acquisition is a truly momentous event in the 42-year history of our company. With ownership of two successful companies and the best talent available in the industry, we expect to accomplish great things as we build the new WD to be the world's leading storage solutions provider with the industry's deepest technology capability, broadest product portfolio and best-in-class execution," said John Coyne, chief executive officer of WD.
The new Western Digital will operate with WD Technologies (WD) and HGST as wholly owned subsidiaries. Aggregated revenues of the two companies in 2011 were $15 billion.
"Similar to successful multi-brand models in other industries, the two subsidiaries will compete in the marketplace with separate brands and product lines while sharing common values of customer delight, value creation, consistent profitability and growth," added Mr. Coyne.
A recently updated HDD forecast by IDC predicts industry revenue growth at a compound annual growth rate of 8.6% per year from 2011 to 2016.
"The growth in demand for digital storage continues unabated driven by the expansion of digital content in consumer and commercial applications. Mobility, cloud infrastructure, social business, and big data analytics are stimulating demand for digital content in new formats and new market segments, creating the need for an increasingly diverse set of storage products and technology capabilities from storage solutions providers," said John Rydning, research vice president, hard disk drives and semiconductors at IDC.
The cash portion of the purchase price was financed by a $2.3 billion, five-year term loan, short-term financing under a $500 million revolving credit agreement and existing company cash balances. The company expects the transaction to be immediately accretive to earnings per share on a non-GAAP basis, excluding acquisition-related expenses, restructuring charges and amortization of intangibles. In addition, the company expects to maintain a positive net cash position.
As chief executive officer of WD, John Coyne heads up the new office of the CEO, with Steve Milligan as president, Tim Leyden as chief operating officer and Wolfgang Nickl as chief financial officer.