Hard-disk drive maker Western Digital Corp (WDC.O) agreed to buy SanDisk Corp (SNDK.O) in a $19 billion deal that will increase its ability to make flash memory storage chips used in smartphones and tablets.
SanDisk shares hit a high of $78.50 on Wednesday, but closed nearly $10 below the offer price of $86.50 in cash and stock, a fact that analysts attributed to the deal’s complexity.
Western Digital said the value of the transaction hinges on the closing of an investment in the company by Unisplendour Corp Ltd, a unit of China’s state-backed Tsinghua Holdings Co Ltd [TSHUAA.UL].
Unisplendour said in September it would buy 15 percent of Western Digital for $3.78 billion, a deal that is likely to face regulatory scrutiny amid national security concerns.
Western Digital Chief Executive Steve Milligan said in an interview that the Sandisk acquisition will ultimately dilute Unisplendor’s stake and that he was highly confident it would be approved by regulators.
“There’s always a risk and you’re not done until you’re done, but we were careful and consulted with U.S. government experts,” he said.
Western Digital’s move to buy SanDisk is the latest in a flurry of deals in the U.S. semiconductor industry, which has been hit by a supply glut and cheaper products from China that have driven down memory chip prices.
Research firm Gartner said in October that worldwide semiconductor sales are expected to fall for the first time in three years in 2015, due partly to increasingly saturated market for smartphones.