February 24, 2016
Team,
Yesterday, Western Digital, or WDC, announced that the proposed agreement to sell a minority equity investment in WDC to a subsidiary of Unisplendour Corporation Limited (Unis) has been terminated by Unis’s subsidiary after a review by the Committee on Foreign Investment in the United States (CFIUS). Unis’s subsidiary chose to exercise an option to terminate their agreement with WDC upon CFIUS’s decision to undertake further review of the proposed investment.
As you may recall, this investment from Unis was intended to provide WDC with cash towards the acquisition of SanDisk. When the merger agreement was signed between WDC and SanDisk, it was understood that there was a possibility that the Unis investment in WDC may not be consummated. Consequently the merger agreement provided for the following 2 options, subject to the terms of the merger agreement:
1) If the Unis investment closed prior to WDC’s acquisition of SanDisk, merger consideration per SanDisk share of $85.10 in cash and 0.0176 shares of WDC stock; and
2) If the Unis investment was terminated or did not close, merger consideration per SanDisk share of $67.50 in cash and 0.2387 shares of WDC stock.
Both options were meant to provide the same $86.50 of value as of the time the merger agreement was signed — based on the average price of WDC stock in the days preceding the merger announcement (approximately $79.50). Due to yesterday’s announcement, the second merger consideration described above is now in effect for the acquisition. Since the consideration is composed of a specific cash amount and a fixed number of shares of WDC, the value of which fluctuates, the aggregate value of the merger consideration changes depending on the value of WDC stock on a particular day. Based on the closing price of WDC stock on February 22, 2016, subject to the terms of the merger agreement, the merger consideration now in effect is valued at approximately $78.50. This is consistent with the terms of the original merger agreement — WDC has not “cut” the purchase price of SanDisk, contrary to some erroneous comments in certain press articles you may have encountered.
Our board, Sanjay and the management team remain committed to WDC’s acquisition of SanDisk and believe it will create significant value for our customers, our employees, and shareholders of both companies. We are continuing to move forward on integration planning, having held a day-long planning meeting with all functional teams last week. We expect to close the transaction in the second calendar quarter of this year as previously discussed.
We look forward to our transformational combination with WDC and capitalizing on the growth opportunities ahead of us as the demand for data storage continues to increase.
This is an exciting time for our industry, and we thank you for your continued dedication and commitment to SanDisk and our customers. We look forward to updating you on new developments in the weeks to come.
-Sumit and Manish |
