China's Unisplendour to Take 15% Stake in Western Digital

By Pedro Hernandez

Unisplendour Corporation Limited (Unis), a subsidiary of Chinese state-backed Tsinghua Unigroup, announced yesterday that it is taking a 15 percent stake in hard drive maker Western Digital in a transaction valued at $3.775 billion.

It's not the first time Tsinghua Unigroup has set its sights on an American technology company. Tsinghua Unigroup made headlines earlier this year when reports surfaced that the Chinese IT company was readying a $23 billion bid to acquire Micron Technology, a Boise, Idaho-based provider of DRAM and flash chips. Micron refused the offer, which piqued national security concerns from U.S. lawmakers.

Now, Tsinghua Unigroup has its sights set on the market for data storage solutions.

"We are excited to establish a relationship with Western Digital, a leading company in the storage industry with a capable and talented management team and workforce," said Weiguo Zhao, chairman of Tsinghua Unigroup and Unisplendour Corporation, in a Sept. 30 announcement. "We believe this long-term investment will serve as a constructive collaboration model for Chinese and U.S. companies to work together for success."

Although best known as a hard disk drive (HDD) manufacturer, over the years Western Digital has been pursuing exploring other data storage technologies.

In the summer of 2013, Western Digital expanded its footprint into enterprise flash storage by acquiring sTec, a Santa Ana, Calif.-based solid-state drive (SSD) and storage systems company, for $340 million through its HGST subsidiary. HGST, formerly Hitachi Global Storage Technologies, is itself an acquisition that Western Digital completed in 2012 after a yearlong effort costing $4.9 billion.

Under the terms of the deal, Unisplendour will purchase newly-issued Western Digital common stock for $92.50 per share. Steve Milligan, Western Digital's president and CEO, said in a statement that the new financing "will help facilitate our growth as we look to capitalize on the many opportunities and changes within the global storage industry."

Unisplendour will also be granted the right to nominate a representative to Western Digital's board of directors. In a FAQ issued by Western Digital, the company noted that "the board member would be restricted from participating in discussions that involve government contracts, sales, or products and services and other such sensitive matters."

In terms of Western Digital's intellectual property (IP) and trade secrets, the document states that Unisplendour "will not have any day-to-day or operational control over Western Digital, nor will it control, own or manage Western Digital IP or technology."

The companies expect the deal to close in late 2015 or during the first quarter of 2016, pending regulatory approvals.

Pedro Hernandez is a contributing editor at InfoStor. Follow him on Twitter @ecoINSITE.

This article was originally published on October 01, 2015