Mon, Jan. 25, 3:08 PM
- Philips recently announced its has cancelled a $3.3B deal to sell an 80.1% stake in its Lumileds LED lighting unit to an Asian investment group led by Chinese fund GO Scale Capital. The cancellation follows objections from the Committee on Foreign Investment in the United States (CFIUS), and has sparked concerns about growing regulatory scrutiny of Chinese acquisitions - including deals in which the selling company isn't American.
- Synaptics (SYNA -8.1%), SanDisk (SNDK -11.1%), and Western Digital (WDC -4.5%) have all seen steep losses on a day the Nasdaq is down 0.6%. Synaptics soared last Wednesday after Bloomberg reported the company is getting closer to a deal to be purchased by a Chinese investment group for over $110/share.
- Western has a pending deal to sell a 15% stake to China's Unisplendour at a huge premium to current trading levels. The closing of that deal, meanwhile, affects the terms of Western's pending acquisition of SanDisk. Selling a 15% stake to a Chinese firm is, of course, is very different from allowing the firm to fully acquire a company.
- This morning, CLSA's Mark Heller downgraded SanDisk to Underperform, while citing weakening NAND fundamentals and the potential (given the selloff in Western's shares) for Unisplendour to walk away from the Western deal. He now sees a 25% chance the Western/SanDisk deal falls apart.
Mon, Jan. 25, 9:38 AM
- Citing higher deal risk and weakening NAND fundamentals, CLSA's Mark Heller has downgraded SanDisk (SNDK -1.6%) to Underperform, and cut his target by $16 to $70.
- Heller doesn't think weakening fundamentals will unravel Western Digital's (WDC -2.2%) pending cash/stock acquisition of SanDisk, but is worried about the potential for Tsinghua Unigroup subsidiary Unispendour to walk away from its deal to buy a 15% stake in Western for $92.50/share (107% above Western's Friday close).
- If Unisplendour was to walk away, Heller sees Western shareholders deciding on the SanDisk deal. The deal calls for Western to pay $85.10 in cash and issue 0.0176 shares for each SanDisk share provided the Unisplendour investment has closed prior to the acquisition. If it hasn't, the cash payout drops to $67.50, and the stock payout rises to 0.2387 shares. SanDisk currently trades below $67; deal closing has been forecast to occur in calendar Q3.
- Separately, Western has announced the purchase of over 100 IBM "patent assets" related to distributed storage, object storage, and non-volatile memory, as well as a cross-licensing deal with the IT giant; terms are undisclosed. Western says the purchase will augment an existing portfolio of 10K+ patents and patent applications.
- SanDisk's Q4 report arrives on Wednesday. Western's FQ2 report is due on Thursday.
Oct. 21, 2015, 9:32 AM
- Along with announcing a $19B deal to acquire SanDisk (SNDK +4.1%), Western Digital (WDC -2%) says it expects to report FQ1 revenue of $3.4B and EPS of $1.56 vs. a consensus of $3.28B and $1.56. Gross margin fell 90 bps Q/Q to 28.9%. With Seagate (STX -0.5%) having warned last week, the revenue outlook appears to confirm analyst suspicions Western gained enterprise hard drive share.
- Of Western's proposed $86.50/share payout to SanDisk, $85.10/share is in cash. The cash portion of the $86.50/share payout drops to $67.50/share if a planned investment in Western by Tsinghua Unigroup subsidiary Unisplendour (for a 15% stake) hasn't closed or is terminated.
- To help finance the deal, Western plans to obtain a whopping $18.4B worth of new debt facilities. It expects to continue paying its dividend, but will suspend its buyback program.
- Cost synergies are expected to reach a $500M/year run rate within 18 months; the deal is expected to be accretive to EPS within 12 months of closing (not surprising given it's mostly in cash). SanDisk's NAND flash manufacturing JV with Toshiba will be maintained.
- By acquiring SanDisk's NAND chip, controller, and SSD IP, and by gaining the ability to source NAND at cost, Western effectively neutralizes the cannibalization threat posed by SSDs/flash storage to its hard drive ops. For now, Seagate continues to rely on 3rd-party flash manufacturers; an alliance with Micron was formed in February.
- SanDisk is trading roughly 10% below Western's offer price.
Oct. 21, 2015, 8:00 AM
- SanDisk (NASDAQ:SNDK) +5.2% premarket after agreeing to be acquired by Western Digital (NASDAQ:WDC) in a cash and stock deal valued at ~$19B, confirming earlier speculation.
- The $86.50/share offer represents a 15% premium to yesterday's closing price for SNDK.
- WDC says the acquisition will double its market and expand its participation in higher-growth segments, and enable it to vertically integrate into NAND; CEO Steve Milligan will continue to serve as CEO of the combined company.
- WDC -3.1% premarket.
- Earlier: SanDisk beats by $0.29, beats on revenue
Oct. 19, 2015, 4:42 PM
- Six days after reporting SanDisk (NASDAQ:SNDK) has talked with Micron (NASDAQ:MU) and Western Digital (NASDAQ:WDC) about a potential sale, Bloomberg reports SanDisk is in advanced sale talks with Western.
- Negotiations are said to have "accelerated" over the weekend. A deal could be reached as soon as this week.
- Western has been viewed by analysts as a smoother fit than Micron, given it's not currently a NAND flash manufacturer - with many thinking Western needs to become one to insure itself against hard drive cannibalization by SSDs - and SanDisk and Micron respectively having NAND alliances with Toshiba and Intel.
- SNDK +8.3% after hours. WDC -3.1%. MU -1.3%. Micron joined SanDisk in rallying last week following Bloomberg's original report, fueled by expectations a deal would improve Micron's NAND scale and IP, and potentially lead to more favorable industry pricing.
- Earlier today: SanDisk gains following Korean site's M&A report
Oct. 19, 2015, 9:18 AM
- More than three years after Western Digital (NASDAQ:WDC) closed its acquisition of Hitachi's hard drive unit (HGST), China's Ministry of Commerce has approved integrating the business with Western Digital proper.
- The company will continue selling products under both the HGST and Western Digital brands, and maintain separate sales teams for two years. However, it plans to start integrating "corporate and other key functions, including [R&D], heads and media operations, engineering and manufacturing."
- HGST president Mike Cordano has been appointed to the newly-created position of COO. Western president Jim Murphy will now run the company's storage devices unit.
- Western is up 3.6% premarket. Archrival Seagate (NASDAQ:STX), hit hard last week by an FQ1 warning that some analysts argued indicates enterprise share loss to Western, is down 1.2%.
- Update (10:39AM ET): Western has given back its early gains. Seagate is down 2%.
Oct. 13, 2015, 5:07 PM
- Sources tell Bloomberg SanDisk (NASDAQ:SNDK) is in talks with Micron (NASDAQ:MU) and Western Digital (NASDAQ:WDC) about a possible acquisition. No decision has been made.
- Acquiring SanDisk, which partners closely with Toshiba (OTCPK:TOSBF) on NAND flash manufacturing, would turn Micron (NAND partnership with Intel) into a heavyweight within the NAND market - Samsung and SanDisk/Toshiba are currently the market's biggest players. Micron received 32% of its August quarter revenue from flash, and 60% from DRAM. The company has been betting on 3D NAND and 3D XPoint to strengthen its flash position.
- Western has made several smaller flash-related acquisitions, as it tries to offset the gradual encroachment of SSDs/flash storage on hard drives. However, none of the buyout targets were comparable in scale to SanDisk, and Western still depends on 3rd-party NAND suppliers who also compete with the company in the SSD market.
- SanDisk +11.5% after hours to $68.90. Micron +2.6% to $18.65. Western +0.8% to $85.00.
- Earlier: SanDisk jumps on reported sale effort
Apr. 6, 2015, 12:43 PM
- Following the 20%+ plunge seen in response to the company's Q1/2015 warning, SanDisk (NASDAQ:SNDK) is trading 40% below its replacement value (as measured in terms of fabs, royalty revenue, and cash), estimates Bernstein's Mark Newman. That, in turn, leads him to call the NAND flash giant a compelling buyout target.
- Newman adds there's "growing unrest" among SanDisk investors over its current valuation, and considers the company an "obvious" target for activists. His list of potential suitors includes NAND rivals Micron and SK Hynix, and hard drive giants Seagate and Western Digital.
- Of note: Antitrust regulators would closely vet a Micron or Hynix acquisition, given the potential pricing impact of further NAND consolidation. And Seagate recently formed a NAND alliance with Micron.
- Susquehanna also argues today SanDisk makes for a good buyout target, but focuses specifically on Western Digital (WDC +0.1%). The firm argues an acquisition of SanDisk by Western, which has already made a string of flash-related purchases (all enterprise-related) to protect its flank as SSDs continue encroaching on hard drives, would be accretive for Western in year 2 even at a 35% premium.
Mar. 3, 2015, 11:12 AM
- Western Digital's (WDC -2.5%) HGST unit (formerly Hitachi's hard drive division) is acquiring Amplidata, a provider of software for managing object storage deployments within data centers. Terms are undisclosed.
- Amplidata argues its software, which is sold to enterprises, service providers, and OEMs, offers unmatched data reliability and durability, and can scale infinitely as more nodes are added. Demand for object storage solutions has been outpacing broader storage growth, as enterprises increasingly rely on them to handle unstructured data (documents, e-mails, videos, etc.).
- HGST already relies on Amplidata's software to help power its Active Archive storage systems, and says the deal "supports the company's strategy to expand into higher value data storage platforms and systems." It follows HGST's December acquisition of flash storage array vendor Skyera.
- Of note: Though having a sizable Silicon Valley presence, Amplidata is incorporated in Belgium. Thus, Western is likely using offshore cash to pay for the acquisition.
Dec. 15, 2014, 11:38 AM
- Western Digital's (WDC -0.4%) HGST division (formerly Hitachi's hard drive unit) has completed an all-cash purchase of Skyera, a maker of high-density flash storage arrays for enterprises and cloud service providers implementing scale-out data center architectures (quite popular among cloud firms).
- Terms are undisclosed. The Register's Chris Mellor suspects Western paid $400M or more for Skyera, which has raised $90M-$100M in funding over three rounds.
- Skyera's systems have won praise both for their high densities - the current-gen skyHawk FS can support 136TB of storage in a modest 1U form factor, and the next-gen skyEagle will support 500TB - and their ability to offer flash endurance levels with standard MLC NAND chips that typically require costlier eMLC chips. The startup has also developed a proprietary OS (known as SeOS) for its hardware.
- Western, like Seagate, has been responding to flash's ongoing share gains against hard drives by growing its flash exposure. Last year, the company bought PCI-e flash module vendor Virident, SSD vendor sTec, and SSD caching software startup VeloBit.
Dec. 9, 2014, 10:55 AM
- Western Digital (WDC +0.6%) says it has "successfully resolved two non-compliance matters with China's Ministry of Commerce" related to the regulator's requirement it keep what was once Hitachi's hard drive ops separate from Western's home-grown hard drive ops.
- The ministry has indicated to Western it is "now fully focused on considering Western Digital's application to lift the restriction," which was placed in 2012 as a condition for approving Western's purchase of the Hitachi unit.
- Shares are up slightly, and making new highs in the process. The Nasdaq is down 1%.
Dec. 23, 2013, 6:48 PM
- With Xyratex's storage subsystem business both a supplier and a rival to the storage OEMs who account for a large chunk of Seagate's (STX) enterprise hard drive sales, analysts note Seagate's pending acquisition of Xyratex brings both cross-selling opportunities and channel conflict risks.
- BMO suspects Seagate hopes to use Xyratex (presumably via its ClusterStor line) to directly supply Web/cloud providers, but also notes Seagate "will now compete against a set of customers." The Register's Chris Mellor: "Western Digital (WDC) and Toshiba ... should pick up some extra [hard drive] business from OEMs displeased by Seagate competing with its own channel."
- Piper, however, likes how Xyratex's hard drive equipment unit could lower Seagate's hard drive testing times and capex. It also observes Xyratex claims IBM, H-P, NetApp, and Dell as clients, even if it competes with them to an extent.
- Wells Fargo likes the deal, but also thinks Seagate may still need to make some flash storage acquisitions. Western Digital has been more aggressive here, snapping up server flash module vendor Virident and module/SSD supplier sTec.
- Deutsche, meanwhile, expects Teradyne's (TER) hard drive test equipment sales to get a boost as Western Digital and Toshiba stop buying test equipment from Xyratex.
Dec. 23, 2013, 9:25 AM
- Seagate (STX) is acquiring hard drive equipment/storage subsystem maker Xyratex (XRTX) for $13.25/share, or $294M if excluding $80M in cash on hand. The price represents a 27% premium to Xyratex's Friday close. (PR)
- By acquiring Xyratex, which has counted Seagate, Western Digital (WDC), and Toshiba among its clients (the latter two might now now turn to other suppliers), Seagate is vertically integrating in an effort to gain a manufacturing edge. The purchase comes shortly after Western beat Seagate to the punch in shipping helium drives (they're lighter, denser, and more power-efficient than conventional drives), a technology long promoted by Xyratex.
- The deal also increases Seagate's enterprise storage exposure. As SA Pro contributor Kingsley Park Capital has noted, Xyratex, historically focused on relatively low-end solutions, recently launched ClusterStor, a solution aimed at the growing, higher-margin HPC storage market.
- Seagate expects the purchase to contribute $500M-$600M to FY15 (ends June '15) revenue, and to be neutral to FY15 EPS. The deal is expected to close by mid-2014. Activist investor Baker Street Capital, which has a large stake in Xyratex, backs the deal.
Sep. 9, 2013, 10:26 AM
- Virident, like Fusion-io (FIO +11.3%), offers PCI-Express-based server flash memory modules meant for performance-intensive applications. And beaten-down Fusion-io has been the subject of plenty of M&A speculation over the last two years.
- Virident asserts its FlashMAX II PCI-Express modules offer 2x the performance of rival solutions.The company also provides FlashMAX Connect, an innovative software solution for allowing FlashMAX II modules to be clustered, to mirror/replicate content, and to act as caches for 3rd-party storage.
- Western Digital (WDC -0.5%) should be able to greatly expand Virident's distribution. The purchase comes less than 3 months after WDC announced it's buying enterprise SSD vendor sTec for $207M.
- In addition to Fusion-io, Virident competes against EMC, which offers its XtremSF flash modules and other flash storage products, and private flash storage system vendors such as Nimble Storage and Violin Memory.
- Interestingly, Western Digital archrival Seagate (STX -0.8%) recently invested $40M in Virident and struck a reseller deal with the company. Though Seagate is probably getting a good return on its investment, it can't be happy to see Virident fall into WDC's arms. Will it counter by making a play for Fusion-io?
- Previous: Western Digital buying Virident for $685M
Sep. 9, 2013, 8:29 AM
- Western Digital (WDC +0.6%) unit HGST has agreed to acquire Virident Systems, a provider of server-side flash storage products, in a deal worth $685M.
- The enterprise value of the transaction is $645M, net of Virident's estimated cash balance at closing.
- The acquisition extends HGST's presence in the market for corporate solid-state drives (SSD), which IDC forecasts will grow to $7B by 2017 from $2.5B in 2012.
- The deal is expected to close in Q4. (PR)
Jul. 10, 2013, 10:15 AM
Western Digital (WDC +0.6%) follows up on the sTec purchase by acquiring VeloBit, a developer of server-based SSD caching software that improves I/O performance for databases and enterprise applications. VeloBit's software, which has received good reviews, will be integrated with WDC's SSDs, presumably including sTec's. Deal terms are undisclosed.| Jul. 10, 2013, 10:15 AM