Western Digital shares slump after the end of deal talks with Kioxia
After the cancellation of deal talks with Kioxia Holdings Corp, Western Digital Corp’s share price fell as much as 13% on the stock market on Thursday. The termination of deal talks quashed hopes for a combination of their flash memory businesses.
On Thursday, Western Digital witnessed its worst intraday drop since October 2021. The company shares slumped as low as $36.55 in New York.
As of now, the discussions between the two firms have ended for now, reported Bloomberg citing people familiar with the situation. The deal talks ended after SK Hynix withdrew its support for the deal. The world’s no.2 memory chipmaker, SK Hynix, is an indirect shareholder in Kioxia. Withdrawal of its support for the deal came after it felt the transaction would undervalue its stake. Earlier, Nikkei reported that Western Digital and Kioxia had scrapped the deal, according to BB.
Not a dead end for the Kioxia-Western Digital deal
Despite the termination of deal talks, there are chances that the discussions on the matter might resume in the future, said a Bloomberg source. A representative for Western Digital declined to comment.
SK Hynix was “not agreeing to the deal at this time in light of the overall impact on the value of the company’s investment” in Kioxia, the company said in its post-earnings conference call.
The company “will make a decision for the sake of all stakeholders, including not only the shareholders but also Kioxia,” Chief Financial Officer Kim Woohyun said. The semiconductor firm abstained from giving any more detail about its stance because of confidentiality agreements.
About Western Digital and Kioxia deal
The two firms have talked for years about a possible combination, but discussions were hindered by issues of control, leadership, economics, and politics. The merger of the two firms would have helped the companies gain an upper edge in the memory chip industry over kingpins. The pair had looked to wrap up negotiations this month and aimed to announce a transaction no later than when the US firm reports earnings on October 30, reported Bloomberg.
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Updated: 26 Oct 2023, 10:23 PM IST
Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.