Shulou(Shulou.com)11/24 Report--

Western Digital announced Tuesday that it will receive a $900 million (currently about 6.075 billion yuan) investment led by Apollo Global Management to secure financial support during a difficult period when the storage industry may face further consolidation, Beijing time. The move comes after Western Digital shares fell more than 6 per cent in after-hours trading on Tuesday amid a disappointing revenue outlook.

According to the announcement on Tuesday, Apollo's funds will buy Western Digital's convertible preferred shares, while Reed Rayman, an Apollo partner, will get a seat on Western Digital's board. Hedge fund Elliott Investment Management is also involved in the investment.

Sources said Tuesday's investment was a harbinger of a merger between Western Digital and Japan's Kioxia. The merger and acquisition negotiations are still actively under way. Western Digital's hard drive business is expected to remain independent, but details are still likely to change.

According to previous reports, the parties have finalized a general transaction structure, Western Digital will spin off the flash business and merge with armor to form a listed company in the United States. Western Digital declined to comment on the deal negotiations.

David Goeckeler, Western Digital chief executive, said Apollo and Elliott would help Western Digital with the next phase of its strategic review. "We look forward to working together to advance the goal of creating value and bring the best possible strategic outcome to our shareholders," he said in the announcement. "

Lehman at Apollo said Western Digital was "an iconic American company critical to the global digital infrastructure".

Last June, Western Digital announced that it would review the company's possible strategic options after talking to activist investor Elliott.

Jesse Cohn, managing partner of Elliott, and Jason Genrich, senior investment manager, said they were "encouraged by the progress Western Digital has made in terms of its strategic review".

Western Digital is grappling with an oversupply in the industry and the consequent decline in profits and revenue as consumers buy fewer smartphones and computers. In the past, during the downward period of such an industry, companies would seek survival through mergers and acquisitions to expand the scale of operation. So far, there are only a handful of manufacturers in the field of flash memory and computer storage after several rounds of mergers and acquisitions.

Currently, Samsung, as one of the world's largest electronics and semiconductor manufacturers, is in a dominant position in this market.

Western Digital expects revenue to be as low as $2.6 billion (currently about 17.55 billion yuan), below the average analyst estimate of $3.1 billion in Bloomberg statistics. Western Digital shares fell more than 6 per cent in after-hours trading on Tuesday after the news. Western Digital shares are up 39 per cent so far this year.

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