Western Digital Sells 15% Stake to State-Owned Chinese Company

A unit of Tsinghua Unigroup Ltd, a state-owned Chinese company has agreed to acquired a stake of 15% of Western Digital Corp for a price of $3.78 billion, said the Irvine, California disk drive data-storage maker.

This deal is just the latest effort by a company from China that is state-controlled to expand overseas holdings. It also gives an important cash infusion to Western Digital to help with its growth.

Tsinghua’s company Unisplendor Corp which goes by Unis, has agree to pay the sum of $92.50 for the newly issued shares of Western Digital, which represents a premium of more than 34% to the closing prices on Tuesday of Western Digital stock.

In response to that announcement, the stock at Western Digital increased by 15.3% a share during Wednesday trading. Steve Milligan the CEO at Western Digital said the Unis equity investment would help to facilitate growth at the company.

Western Digital has a workforce of more than 76,500 employees and during its fiscal year that ended on July 3 generated revenue of more than $14.5 billion.

However, Western has had trouble with a growth slowdown in specific markets such as PC sales. The stock at Western Digital has lost 38% of its value during 2015.

This summer Tsinghua Unigroup reportedly had been in preparation to offer as much as $23 billion in an attempt to acquire Micron Technology a leading U.S. maker of semiconductors.

However, the deal did not materialize amidst speculation it would have problems due to strong opposition within the United States over concerns for national security.

The current deal between Western Digital and Unis is likely to go through a difficult review by a governmental agency in the U.S. for any implications it would have with national security.

However, the Chinese company is only attempting to acquire a minority stake rather than take control of Western Digital.

The deal will also give Unis a right to have a director on the board at Western Digital which at present had nine members.

 

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