WD Gets $900 Million Invesment from Apollo Global Management

Western Digital Corporation announced that funds managed by affiliates of Apollo Global Management, Inc. led the purchase of $900 million of its convertible preferred stock, along with Elliott Investment Management L.P. (together with its affiliates, “Elliott”) who also invested in the convertible offering.

The investment strengthens WD’s financial position and flexibility as the company continues its review of strategic alternatives aimed at further optimizing long-term value for its shareholders.

“This investment was the result of a comprehensive outreach and evaluation process to appropriately capitalize the company and retain optionality for future strategic decision making,” said David Goeckeler, CEO. “We have tremendous respect for Apollo and Elliott. Their partnership and perspectives as experienced capital investors will help us facilitate the next stages of WD’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.”

“WD is an iconic American business that is critical to the global digital infrastructure, with a strong, long-term track record as a leading developer and producer of storage technology,” said Reed Rayman, partner in private equity, Apollo. “We see substantial opportunity and value creation ahead for WD and are excited to make this investment, which enables WD to continue executing on its innovation-led strategy and producing market-leading products for its customers. We look forward to working with David and the board as they position the company for long-term success.”

Elliott managing partner Jesse Cohn and senior portfolio manager Jason Genrich said: “We are pleased to participate in this investment and are encouraged by the progress WD has made in its strategic review process to date. Our participation follows our previous offer to provide strategic resources and additional capital to help the company realize the full value of both its HDD and flash businesses. We are strong believers in WD’s compelling growth opportunity, and we look forward to continuing our support for David and his management team’s execution, strategic vision and focus on shareholder value.”

In connection with the Apollo funds’ investment, Rayman was appointed to WD’s board of directors.

Terms of transaction
The preferred stock has an initial conversion price of $47.75 per share of WD’s stock, subject to customary anti-dilution and other adjustments. The initial conversion price of $47.75 represents a 25% premium to the volume-weighted average closing price of the common stock over the 20-day period ending on January 30, 2023, and a 44% premium to the closing price on January 4, 2023, the last trading day prior to merger rumors involving WD. The preferred stock will bear a cumulative and compounding dividend at a rate of 6.25% per annum over the initial liquidation preference of $1,000.00, until the seven-year anniversary of the closing, at which time the dividend shall increase to 7.25% per annum until the ten-year anniversary of the closing, at which time the dividend shall increase to 8.25% per annum.

Amendment to WD/Elliott June 7, 2022 Letter Agreement
Also announced, WD and Elliott revised their June 7, 2022 letter agreement to provide Elliott with a board seat right subject to certain conditions outlined.

Advisors
Qatalyst Partners, Lazard and J.P. Morgan are serving as WD’s financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel.

Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as the Apollo funds’ legal counsel.

Gibson, Dunn & Crutcher LLP is serving as Elliott’s legal counsel.