Western Digital Shares Jump 2% Premarket After Reaching Settlement With Activist Investor Elliott.
Western Digital Corp. reached a settlement with activist investor Elliott Management Corp. that calls for the $19 billion company to consider splitting into two.
The company said in a statement that it would consider strategic alternatives including a separation into businesses focused on traditional hard drives for computers and flash memory, respectively, confirming an earlier report by The Wall Street Journal.
Elliott in May revealed a 6% stake in Western Digital and sent a letter calling on the company to explore a breakup.
San Jose, Calif.-based Western Digital, which has a market value of around $19 billion, previously said it would consider Elliott's ideas. At a conference in late May, Western Digital Chief Executive David Goeckeler said the company and Elliott had been discussing additional ways to improve the company's valuation.
Western Digital in 2020 decided to form separate units for its two businesses, a move Elliott praised and some saw as a precursor to a split.
Meanwhile, Japanese chip maker Kioxia Holdings Corp. is still open to a possible deal with Western Digital, according to people familiar with the matter.
Western Digital and Kioxia had been speaking since early 2021 and were working on a stock deal that would have created a memory-chip powerhouse, the Journal reported last summer. But the talks stalled, partly because of a steady decline in Western Digital's shares.
Kioxia's business would be a logical fit for Western Digital's flash unit, which Elliott estimated could command an enterprise value of $17 billion to $20 billion. That is roughly equal to Western Digital's market capitalization before its shares rose when Elliott's campaign surfaced.
Elliott also said in the letter to the company that it would invest an additional $1 billion or more in equity in a potential spinoff or merger of the flash business in conjunction with another industry player.
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