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Western Digital to Complete SanDisk Acquisition by June 2016

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Product and revenue synergies

The SanDisk (SNDK) and Western Digital (WDC) merger is expected to create a company with nearly $20 billion in combined revenue. The combined company would be able to capitalize on the enterprise storage products market. This market is estimated to reach $76 billion by 2017.

Western Digital plans to gain access to SanDisk’s foundries and intellectual property. SanDisk, in partnership with Hewlett-Packard (HPQ), developed a storage class memory technology. SanDisk claims that this technology can compete with Intel (INTC) and Micron Technology’s (MU) breakthrough memory chip 3D XPoint. SanDisk is building a 3D NAND facility in a joint venture with Toshiba in Japan (EWJ).

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The integration of SanDisk’s intellectual property with Western Digital’s resources is expected to generate considerable cost savings. It should put the combined company in a position to compete with Samsung and Micron in terms of pricing. During the earnings call, WDC stated that it expects the deal to close by the end of June 2016.

Shareholders approved the WDC–SNDK merger

The shareholders of Western Digital (WDC) and SanDisk (SNDK) have approved the $17 billion merger. The merger carried a $19 billion price tag, but it was reduced to $17 billion in light of Unisplendour’s withdrawal from the deal to acquire a 15% stake in Western Digital.

The merger is expected to come through despite opposition from a top Western Digital shareholder—Alken Asset Management.

Under the revised deal, Western Digital will pay $67.50 in cash and about 0.24 shares for every share of SanDisk. This values the deal at $17 billion, or $78.50 per share, compared to the previous offer of $19 billion, or $86.50 per share. Western Digital could look to raise debt of around $10 billion to fund the cash portion of the merger.

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