Merger Talks Between Western Digital and Kioxia Holdings Stall as SK Hynix Opposes Deal
TOKYO – Merger talks between Western Digital and Kioxia Holdings have hit a roadblock due to opposition from Kioxia investor SK Hynix, complicating the potential creation of a memory chip giant. According to two sources familiar with the matter, the deal has stalled as SK Hynix has refused to back the merger, citing concerns about the impact on its investment in Kioxia.
The opposition from SK Hynix has effectively frozen the deal, and there has been a failure to reach an agreement on terms, the sources said. The news of the stalled talks caused shares of Western Digital to drop by 9.3%.
It remains unclear whether the merger will ultimately be scuppered or if there is a possibility for it to be revived. Both Western Digital and Kioxia are said to be keen on sealing the tie-up, according to people familiar with the negotiations.
Representatives of Western Digital and Kioxia have been working behind the scenes to address these challenges, including attempting to win over SK Hynix, one of the sources revealed. However, none of the parties involved have made any public statements regarding the status of the merger.
One of the major hurdles for the deal is the potential antitrust issues that could arise, particularly with Chinese regulators. The merger would result in the combined company controlling a significant portion of the global NAND flash market, which could threaten the position of SK Hynix, the world’s third-largest maker of NAND flash memory.
Both Western Digital and Kioxia have reported significant losses in their latest quarterly reports, highlighting the challenges in the chip market. A potential merger between the two companies would allow for cost-cutting opportunities and increased competition.
Last year, Western Digital underwent a strategic review after activist investor Elliott Investment Management acquired a sizable stake in the company. The review aimed to evaluate alternative options and separate certain business divisions.
Japanese banks were reportedly set to provide extensive financing support for the merger, totaling 1.9 trillion yen ($12.63 billion). However, SK Hynix, which invested 395 billion yen in Kioxia in 2018, holds convertible bonds that require approval for the merger to proceed.
The cancellation of the merger talks has drawn attention from Japanese industry officials, with Yasutoshi Nishimura, the country’s Industry and Trade Minister, expressing a commitment to supporting Kioxia as an important manufacturer of advanced chips.
As the negotiations have gone back and forth since 2021, it is uncertain whether the merger will ultimately come to fruition. The complexity of the deal, along with potential regulatory challenges, has raised doubts about its approval.