Western Digital to Acquire Hitachi Global Storage, Combining The Industry’s First And Third Largest Hard Drive Makers

Western Digital and Hitachi, Ltd. announced Monday 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 company says the proposed combination of the largest and third-largest makers of hard disk drives (WD c.31%, Seagate Technology c.29%, Hitachi GST c.18%, Toshiba c.11% and Samsung also c. 11% based on market research firms iSuppli data). 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. Buying Hitachi GST will also give WD more reach in Apple’s Macs, since Hitachi has been a major HDD supplier to Apple.

Under 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,” commented WD president and CEO Coyne on the acquisition announcement. “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 Hitachi Global Storage Technologies president and CEO Steve Milligan. “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. observed that “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.”

An archive of WD’s investment community conference call to discuss the announcement is accessible via the link below:
http://www.westerndigital.com/investor

Click on “Conference Calls”

Telephone replay:
888-568-0891 (toll free) or +1-402-998-1567 (international)

For more information, visit:
http://www.westerndigital.com
and
http://www.hitachigst.com