As Expected, Western Digital to Separate Into 2 Public Companies

Western Digital Corp. announced its board of directors has unanimously approved a plan to separate its HDD and flash businesses.

Creating 2 independent, public companies with market-specific, strategic focus, the separation will better position each franchise to execute innovative technology and product development, capitalize on unique growth opportunities, extend respective leadership positions, and operate more efficiently with distinct capital structures.

The transaction also provides strategic optionality for both businesses. The separation is intended to be structured in a tax-free manner and is targeted for 2CH24.

“Our HDD and flash businesses are both well positioned to capitalize on the data storage industry’s significant market dynamics, and as separate companies, each will have the strategic focus and resources to pursue opportunities in their respective markets. Importantly, separating these franchises will unlock significant value for Western Digital shareholders, allowing them to participate in the upside of two industry leaders with distinct growth and investment profiles,” said David Goeckeler, CEO. “We have already laid important groundwork by building market-leading portfolios and enhancing the operational efficiency of each business, including the creation of separate flash and HDD product business units and separating operational capabilites over the past several years. Additionally, we now have strong product, operational, and financial leadership in place to execute this plan successfully. Each business is in a solid position to succeed on its own, and the actions we are announcing today will further enable each company to drive long-term success in the years to come.“

In completing its strategic review after fully evaluating a comprehensive range of alternatives, Western Digital has determined that to realize its full value, spinning off its flash business is the best, executable alternative at this time. To that end, it believes the current timing for implementing a stand-alone separation strategy is advantageous in its efforts to create shareholder value as industry conditions improve.

“During our strategic review process, we thoroughly evaluated strategic transactions that could be value-accretive to Western Digital. However, given current constraints, it has become clearer to the board in recent weeks, that delivering a stand-alone separation is the right next step in the evolution of Western Digital and puts the company in the best position to unlock value for our shareholders,” Goeckeler added. “We are now emerging from a historic cyclical downturn in storage where all the changes made in the past several years are evident in how well each business performed relative to peers. Moving forward, as we progress through FY24, we see an improving market environment in both businesses, and we will remain open to strategic opportunities that unlock further value in both our HDD and flash investments and assets.”

The final determination to separate will be subject to board approval, the execution of definitive documentation, receipt of opinions or rulings as to the tax-free nature of the transaction, and satisfaction of customary conditions, including effectiveness of appropriate filings with the U.S. SEC, the completion of audited financials, and the availability of financing.

The board of directors engaged Qatalyst Partners, Lazard and J.P. Morgan as financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP as legal counsel during the strategic review process.