Western Digital Corp. (WDC) shares jumped higher Wednesday after the chipmaker said it would launch a review of its strategic options following a renewed push by activist investors for the sale of its flash memory business.
Activists at Elliott Management, which claims a 6% stake in the group valued at around $1 billion, pledged another $1 billion in financing last month to help fund either a spin-off, sale or merger with a strategic partner of the flash memory unit, which its says could be valued at between $17 billion and $20 billion.
Western Digital said late Tuesday that its board is "aligned in the belief that maximizing value creation warrants a comprehensive assessment of strategic alternatives focused on structural options for the company’s Flash and HDD businesses.”
“Through this process, we are actively engaging in a broad range of strategic and financial alternatives that will help further optimize the value of Western Digital, including Elliott’s offer to invest incremental equity capital in our Flash Business," said CEO David Goeckeler. "We look forward to continuing our constructive dialogue with Elliott as this process unfolds.”
WDC shares were marked 1.6% higher in early Wednesday trading to change hands at $61.08 each, a move that would trim the stock's year-to-date decline to around 7%.
San Jose, California-based Western Digital makes flash memory chips in Japan as part of a business arrangement with Kioxia, which was sold by Toshiba Corp. to a private equity consortium lead by Bain Capital in 2018, is one of the world's biggest NAND chipmakers in the world and a key supplier to Apple Inc.'s (AAPL) iPhones.
Western Digital, which attempted to buy Kioxia four years ago, purchased rival SanDisk Corp. in 2016, but faced activist pressure at the time for the $17 billion deal, which some said was pegged at too high a price
It also competes with South Korea's Samsung Electronics and SK Hynix, which bought Intel Corp.'s (INTC) flash memory business in 2020 for around $9 billion.
