Ministry of Commerce of China (MOFCOM) Approved Acquisition of SanDisk by Western Digital

SanDisk Corporation announced that the Ministry of Commerce of China (MOFCOM) has approved the acquisition of SanDisk by Western Digital Technologies, Inc., a wholly-owned subsidiary of Western Digital Corporation.

All necessary regulatory approvals for the acquisition have now been received and the transaction is expected to close on Thursday, May 12, 2016. SanDisk stockholders previously voted to approve the transaction at a special meeting of stockholders held on March 15, 2016.

“We are pleased that the final regulatory approval has been received and we can now proceed with the planned combination with Western Digital,” said Sanjay Mehrotra, president and CEO, SanDisk. “We thank our stakeholders for their support of this transaction and look forward to contributing to the success of Western Digital as it transforms into the leading storage solutions company.”

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This is a Trendfocus, Inc.'s Executive Brief published yesterday:

China's MOFCOM Clears the Path for WDC to Close on SanDisk Acquisition

In brief joint press releases issued yesterday, both WDC and SanDisk announced that China's Ministry of Finance and Commerce (MOFCOM) has approved WDC's planned acquisition of SanDisk.

In a deal worth approximately $16 billion, the transaction is scheduled to close this Thursday, May 12, 2016. WDC's release highlighted that the MOFCOM notification joins regulatory approvals already made by the U.S., E.U., Singapore, Japan, Taiwan, South Korea, South Africa and Turkey.

The acquisition of SanDisk comes at a turbulent time for the HDD market, with HDD TAM's dropping 30% year over year to 100 million units in CQ1 '16. WDC itself has weathered the HDD downturn reasonably well, holding its gross margins at levels close to its target operating model. At the same time, the company is completing its initial round of HGST integration activities and, in response to the rapidly eroding HDD market, will likely embark on further actions to cut costs and to size the business for the shrinking TAM.

By closing on the SanDisk acquisition in CQ2 '16 - an improvement on original estimates of CQ3 - WDC can now tackle the integration of a company that will transform the parent company into a full-portfolio provider of both solid-state and spinning disk storage devices. The combined companies also have intellectual property and capabilities to grow its system-level solutions over time, addressing fundamental market shifts occurring in the enterprise sever/storage and cloud markets.

SanDisk's last earnings announcement in April 2016 highlighted improvements the company has made in year-over-year revenue and earnings. In data that will be published in TRENDFOCUS' NAND/SSD Information Service CQ1 '16 Quarterly Update, SanDisk achieved marked improvements in total SSD shipments, growing units by 30% year-over-year. Both client and enterprise SSD solutions grew in units and bits shipped, with total SSD bit shipments rising more than 75% from the year-ago quarter. In addition, SanDisk grew sequential SSD shipments by nearly 8%, with a 50% rise in enterprise SSD units and a nearly 6% rise in client SSDs from the prior quarter. SSD bit shipments also increased by 20% sequentially, demonstrating that the SSD business for SanDisk is recovering well from recent challenges.

WDC will provide an updated outlook for the current quarter after the SanDisk acquisition closes. Expected questions include updates to the current enterprise HDD market demand as well as the status of SanDisk's transition to its 3D BiCS NAND.