Western Digital, Kioxia secure $13bn in financing for chipmaking mergerFocus turns to getting SK Hynix approval for deal between U.S., Japanese firms
Nikkei staff writersOctober 21, 2023 00:02 JST
TOKYO -- Western Digital and Kioxia Holdings have secured 1.9 trillion yen ($12.7 billion) in financing from a group of Japanese lenders to smooth the way for a merger between the two chipmakers, Nikkei learned Friday.
The two manufacturers look to sign a preliminary agreement this month. The deal basically would involve an equity swap between them, but loans taken out during Japan-based Kioxia's restructuring need to be refinanced.
For that purpose, Japan's top three banks and the state-backed Development Bank of Japan will extend the 1.9 trillion yen. The financing will include a 400 billion yen line of loan commitments Kioxia can draw upon for working capital.
Western Digital, based in the U.S., plans to integrate its memory business with peer Kioxia under a holding company. The two sides seek to close the merger with the blessing of SK Hynix, as the South Korean chipmaker is an indirect investor in Kioxia.
But SK Hynix has signaled unwillingness to sign onto the merger yet, because the company looks to collaborate with Kioxia in the future. SK Hynix's approval is needed for the merger to proceed, and negotiations now will take center stage.
Kioxia is the world's third-largest flash memory company, while Western Digital ranks fourth. The planned merged entity would be on par with global leader Samsung Electronics.
The merged entity would be registered in the U.S., but have its home office in Japan. Kioxia would form 63% of the new company based on enterprise value, with Western Digital accounting for 37%.
Following capital adjustments, Western Digital shareholders would own 50.1% of the holding company, while Kioxia's side gets 49.9%.
The partners hope to list the new entity on both the Nasdaq and the Tokyo Stock Exchange. Kioxia President Nobuo Hayasaka would become president of the new company, and Kioxia would control the majority of the board of directors.
Kioxia and Western Digital make NAND flash memory, a type of semiconductor capable of long-term data storage. The two companies have invested in production hubs in Japan's Mie and Iwate prefectures, each footing half the bill.
The scale created by a merger is expected to boost their capacity to procure equipment and materials.
Toshiba spun off Kioxia in 2018, and a consortium led by Bain Capital took a roughly 60% stake. Kioxia had received approval to go public in 2020, but the initial public offering was postponed shortly before the planned date due to heightening tensions between the U.S. and China. |
