Western Digital gets $900 million investment from Apollo, Elliot

Memory chip maker Western Digital Corp said on Tuesday it will receive $900 million through a convertible preferred stock deal from private equity firm Apollo Global Management Inc and hedge fund Elliott Management Corp.

Western Digital said the preferred stock it sold to Apollo and Elliot has a conversion price of $47.75 per share, which is approximately a 9% premium on its closing price of $43.95 on Tuesday. It will also pay a dividend starting at 6.25% per year.

Last year, Western Digital launched a review of strategic alternatives, including options for splitting off its flash-memory and hard-drive businesses, after activist Elliott disclosed a stake of nearly $1 billion in the company and pushed it to separate those businesses.

On Tuesday, Western Digital CEO David Goeckeler said the partnership with Apollo and Elliott would help "facilitate the next stages of Western Digital's strategic review."

"We look forward to working together in advancing our goal of creating value and finalizing the best possible strategic outcome for our shareholders," said Goeckeler.

The latest investment is a precursor to a potential merger between Silicon Valley-based Western Digital and Japan's Kioxia Holdings Corp, according to people familiar with the matter. The sources, who requested anonymity as these discussions are confidential, said the talks between Western Digital and Kioxia are still active.

The two companies were in merger talks in 2021 before the negotiations cooled off.

Bloomberg reported on the talks between Western Digital and Kioxia earlier.

Western Digital and Kioxia jointly produce NAND chips, which are widely used in smartphones, TVs, data center servers and public announcement display panels.

Western Digital's shares fell nearly 7% in trading after market hours.

Qatalyst Partners, Lazard and J.P. Morgan are serving as Western Digital's financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP is serving as Western Digital's legal adviser. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as the Apollo funds' legal adviser, while Gibson, Dunn & Crutcher LLP is serving as Elliott's legal adviser.