NEW YORK Memory chip maker Western Digital Corp said on Tuesday it will receive $900 million through a convertible preferred stock deal from private equity firm Apollo Global Management Inc and hedge fund Elliott Management Corp.
Western Digital said the preferred stock it sold to Apollo and Elliott had a conversion price of $47.75 per share, which is a 9 per cent premium on its closing price of $43.95 on Tuesday. It will pay a dividend starting at 6.25 per cent per year.
In a year ago, Western Digital launched a review of strategic alternatives, including options for splitting its flash-memory and hard-drive businesses, after activist Elliott disclosed a stake of nearly $1 billion in the company and pushed it to separate those businesses.
Western Digital CEO David Goeckeler said that the partnership with Apollo and Elliott would help facilitate the next stages of Western Digital's strategic review. Goeckeler said that they look forward to working together to achieve our goal of creating value and finalizing the best possible strategic outcome for our shareholders.
According to people familiar with the matter, the latest investment is a precursor to a possible merger between Western Digital and Japan's Kioxia Holdings Corp. Sources said that the talks between Western Digital and Kioxia are still active, despite the fact that these discussions are confidential.
The negotiations between the two companies were cooled off in the year 2021 before the negotiations cooled off.
On Wednesday, Bloomberg reported on the talks between Western Digital and Kioxia.
Western Digital and Kioxia produce NAND chips, which are widely used in phones, TVs, data center servers, and public announcement display panels.
Western Digital's shares fell nearly 7 per cent in trading after market hours.
Qatalyst Partners, Lazard and J.P. Morgan are serving as Western Digital's financial advisers and Skadden, Arps, Slate, Meagher Flom LLP is serving as Western Digital's legal adviser. Paul, Weiss, Rifkind, Wharton Garrison LLP is serving as the legal adviser to Apollo funds, while Gibson, Dunn Crutcher LLP is serving as Elliott's legal adviser.