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"Opportunities don't happen. You create them."

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Western Digital Acquires SanDisk

Financial Information
  • Enterprise Value: $17.9 Billion
  • EV/LTM Revenue: 3.0x
  • EV/LTM EBITDA: 10.9x
Transaction Facts
  • Western Digital Corp. (Nasdaq:WDC), the Number 1 maker of disk drives, has announced an agreement to buy SanDisk Corp. (Nasdaq:SNDK), a manufacturer of flash memory.
  • Western Digital has faced slowing growth as disk drives are being replaced with flash memory, which is faster, requires less energy and is less prone to failure. Flash memory is especially popular in the mobile and tablet spaces, but is becoming increasingly common in laptops and data center computers.
  • The deal values SanDisk common stock at $86.50 per share, a 15 percent premium over Tuesday’s closing price. Today, Western Digital stock dropped 4.6 percent while SanDisk shares climbed 2.1 percent.
We’ve Seen This Before
  • Computer Memory Continues Consolidating: According to Dealogic, the computer memory industry has experienced a record $89 billion in M&A activity this year, thanks largely to Dell’s $66 billion bid for data storage company EMC Corp. as well as smaller deals like Western Digital’s $4.9 billion acquisition of Hitachi Global Storage Technologies in March. Data storage companies are finding it increasingly difficult to grow organically, as segments mature.
  • Diversifying into Higher Growth Areas: Western Digital produces a small amount of flash drives, but with this deal is adding to its portfolio the fourth largest global producer of flash memory with a 14.8 percent share of the market. In an interview, Western Digital CEO Steve Milligan acknowledged that the company has recognized their limited offerings in this space “for quite a while.”
  • Putting Investments to Good Use: This transaction comes three weeks after a unit of China’s Tsinghua Unigroup agreed to pay $3.78 billion for a 15 percent stake in Western Digital, providing both funds for this acquisition and an opening into China, one of the fastest growing markets for memory storage.
  • A Boon to Both Sides: So far this year, SanDisk shares are down 21 percent and Western Digital shares are down 35 percent. SanDisk has struggled with delays and lower sales, while Western Digital has encountered declining growth in its core segments. This transaction is expected to add to earnings within 12 months of closing and achieve annual synergies of $500 million within 18 months.
For more information about this transaction, click here to read the press release.
martinwolf was not the advisor in this transaction.
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