Western Digital Buying Hitachi Unit for $4.3B

Western Digital (NYSE:WDC) inked a deal on Monday to snatch Hitachi’s (NYSE:HIT) disk drive unit for $4.3 billion in cash and stock.

Western Digital, which is the world’s second largest hard drive maker, said it will pay $3.5 billion in cash and 25 million of its shares valued at $750 million for the business, Hitachi Global Storage Technologies.

As part of the deal, Hitachi will take a 10% stake in Western Digital and add two representatives to Western Digital’s board.

The acquisition is part of Western Digital’s effort to overtake hard drive leader Seagate Technology (NYSE:STX), which saw its shares surge 10% Monday morning.

Western Digital said it sees the deal, which is expected to close in the third quarter, adding to its adjusted earnings per share immediately.

Western Digital said it expects to pay for the business through a combination of existing cash and total debt of about $2.5 billion.

"The acquisition of Hitachi GST is a unique opportunity for WD to create further value for our customers, stockholders, employees, suppliers and the communities in which we operate," Western Digital CEO John Coyne said in a statement. "We believe this step will result in several key benefits-enhanced R&D capabilities, innovation and expansion of a rich product portfolio, comprehensive market coverage and scale that will enhance our cost structure and ability to compete in a dynamic marketplace.”

Steve Milligan, CEO of Hitachi GST, will join Western Digital as its president, reporting to Coyne.

"This brings together two industry leaders with consistent track records of strong execution and industry outperformance," said Milligan. "Together we can provide customers worldwide with the industry's most compelling and diverse set of products and services, from innovative personal storage to solid state drives for the enterprise."

Western Digital was advised on the deal by Bank of America Merrill Lynch (NYSE:BAC).

Wall Street applauded the deal, bidding Western Digital’s stock up 9% to $32.71 ahead of Monday’s open. The stock had been down more than 11% on the year as of Friday’s close.