Western Digital to acquire Hitachi - End of cheap RAID?

[nitrobass24]

Just saw this press release.

http://www.hitachigst.com/press-roo...o-acquire-hitachi-global-storage-technologies

Combination of Hard Drive Companies Will Create Industry’s Broadest
Product Portfolio and a Significant Pool of Resources for Innovation

IRVINE, Calif. and SAN JOSE, Calif. – Mar. 7, 2011 – Western Digital (NYSE: WDC) and Hitachi, Ltd. (NYSE: HIT / TSE:6501) announced today that they have entered into a definitive agreement whereby WD will acquire Hitachi Global Storage Technologies (Hitachi GST), a wholly-owned subsidiary of Hitachi, Ltd., in a cash and stock transaction valued at approximately $4.3 billion. The proposed combination will result in a customer-focused storage company, with significant operating scale, strong global talent and the industry’s broadest product lineup backed by a rich technology portfolio.

Under the terms of the agreement, WD will acquire Hitachi GST for $3.5 billion in cash and 25 million WD common shares valued at $750 million, based on a WD closing stock price of $30.01 as of March 4, 2011. Hitachi, Ltd. will own approximately ten percent of Western Digital shares outstanding after issuance of the shares and two representatives of Hitachi will be added to the WD board of directors at closing. The transaction has been approved by the board of directors of each company and is expected to close during the third calendar quarter of 2011, subject to customary closing conditions, including regulatory approvals. WD plans to fund the transaction with a combination of existing cash and total debt of approximately $2.5 billion.

WD expects the transaction to be immediately accretive to its earnings per share on a non-GAAP basis, excluding acquisition-related expenses, restructuring charges and amortization of intangibles.

The resulting company will retain the Western Digital name and remain headquartered in Irvine, California. John Coyne will remain chief executive officer of WD, Tim Leyden chief operating officer and Wolfgang Nickl chief financial officer. Steve Milligan, president and chief executive officer of Hitachi GST, will join WD at closing as president, reporting to John Coyne.

“The acquisition of Hitachi GST is a unique opportunity for WD to create further value for our customers, stockholders, employees, suppliers and the communities in which we operate.†said John Coyne, president and chief executive officer of WD. “We believe this step will result in several key benefits: enhanced R&D capabilities, innovation and expansion of a rich product portfolio, comprehensive market coverage and scale that will enhance our cost structure and ability to compete in a dynamic marketplace. The skills and contributions of both workforces were key considerations in assessing this compelling opportunity. We will be relying on the proven integration capabilities of both companies to assure the ongoing satisfaction of our customers and to bring this combination to successful fruition."

“This brings together two industry leaders with consistent track records of strong execution and industry outperformance,†said Steve Milligan, president and chief executive officer, Hitachi Global Storage Technologies. “Together we can provide customers worldwide with the industry’s most compelling and diverse set of products and services, from innovative personal storage to solid state drives for the enterprise.â€

Hiroaki Nakanishi, president, Hitachi, Ltd. said, "As the former CEO of Hitachi GST, I always believed in the potential of Hitachi GST to become a larger and more agile company. This is a strategic combination of two industry leaders, both growing and profitable. It provides an opportunity for the new company to increase customer and shareholder value and expand into new markets. Additionally, it is important to us that WD shares common values with Hitachi GST to create a more global company that is well positioned to define a broader role in the evolving storage industry."

WD’s exclusive financial adviser on the transaction is Bank of America Merrill Lynch; its lead legal adviser is O'Melveny & Myers LLP. Goldman, Sachs & Co serves as financial adviser to Hitachi, Ltd. and Hitachi GST. Legal advisers to Hitachi, Ltd. and Hitachi GST are Morrison Foerster LLP and Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates, respectively.

About Hitachi Global Storage Technologies

Hitachi Global Storage Technologies (Hitachi GST) develops advanced hard disk drives, enterprise-class solid state drives, and innovative external storage solutions and services used to store, preserve and manage the world’s most valued data. Founded by the pioneers of hard drives, Hitachi GST provides high-value storage for a broad range of market segments, including Enterprise, Desktop, Mobile Computing, Consumer Electronics and Personal Storage. Hitachi GST was established in 2003 and maintains its U.S. headquarters in San Jose, California. For more information, please visit the company’s website at http://www.hitachigst.com.

About Hitachi, Ltd.

Hitachi, Ltd., (NYSE: HIT / TSE: 6501), headquartered in Tokyo, Japan, is a leading global electronics company with approximately 400,000 employees worldwide. Fiscal 2008 (ended March 31, 2009) consolidated revenues totaled 10,000 billion yen ($102.0 billion). The company offers a wide range of systems, products and services in market sectors including information systems, electronic devices, power and industrial systems, consumer products, materials, logistics and financial services. For more information on Hitachi, please visit the company's website athttp://www.hitachi.com.

Hitachi GST trademarks are authorized for use in countries and jurisdictions in which Hitachi GST has the right to market the brands. Hitachi GST is not liable for third parties’ unauthorized use of Hitachi GST trademarks.

For more information contact:
For more information contact:

Jim Pascoe
Hitachi Global Storage Technologies
408-717-7924
james.pascoe@hitachigst.com

 

[jbraband]

i saw this too. i have about a dozen 5k3000 slated to be bought in a month or two. does anyone see a scenario were i wouldnt be able to find them then due to inventroy being pulled/discontinued. I read that the merger is expected to be complete in Q3. anyone remember how long after announcement it was when the Maxtor brand was off the shelves?

 

[Mindflux]

Man F this all to hell and back. I won't touch a WD drive. This will now include Hitachis.

 

[odditory]

The enterprise market didn't want to touch WD's drives and so their only choice was to crowbar their way in.

Time will tell how this effects the current product lines but the 7K3000 and 5K3000's will be around for quite a while with hundreds of thousands if not more already manufactured and in distribution.

I hate mergers/acquisitions - rarely is it the synergistic "joining of forces and creativity" that gets waxed by the suits in the press releases.

 

[Patrick]

So WD needs to keep Hitachi drives at least in the SAS world where WD has not been successful.

I did part of the merger integration for Seagate-Maxtor and I can see why the deals would have different results. WD needs Hitachi's SAS designs. Seagate only needed Maxtor's customers.

 

[Mindflux]

So WD needs to keep Hitachi drives at least in the SAS world where WD has not been successful.

I did part of the merger integration for Seagate-Maxtor and I can see why the deals would have different results. WD needs Hitachi's SAS designs. Seagate only needed Maxtor's customers.

I wish Maxtor would have done something with Quantum's stuff. Then in turn, Seagate did something with it. Then again I guess by the time Maxtor was acquired all that was old news.

 

[iceboi714]

Well that fluke with the Seagate 7200.11 kinda scared me off so WD. But since I made a raid file server, i went to Hitachi for the last month. Picked up 10 drives already. I am planning to pick up some more before any new firmware revision comes in and no more raid.

Thats true Odditory..."Joining forces" rarely ever works...its our way or the highway....says the company with the higher owning stock %....lol

 

[Patrick]

So as someone that does quite a bit of M&A work during the day job, Hitachi and Western Digital must act as competitors between now and the close date (approximately 6 months from now). Between now and then, Hitachi drives are likely to continue as normal.

 

[halkx]

well, it looks like they (WD and Seagate) are postponing the closing of the deals until late Q4 because of the EC antitrust investigation to be concluded until early October...let's see how this ends...I don't keep my hopes up though...