Four sources with knowledge of the situation told Reuters that Japan’s major banks plan to provide 1.9 trillion yen ($12.7 billion) in funding to assist the merger of Kioxia Holdings and Western Digital’s flash memory unit.
The financial backing would bring the acquisition that would establish one of the largest memory chipmakers in the world one step closer to completion. Still, it is nearly clear that the transaction will undergo intense anti-trust scrutiny, notably from China.
Several agreements have fallen through in recent years due to regulatory clearance delays or China’s denials. After the merger agreement between Intel Corp. (INTC.O) and an Israeli contract chipmaker expired without receiving Chinese regulatory permission in August, Intel canceled its $5.4 billion bid for the company.
According to three of the sources, four Japanese banks—Sumitomo Mitsui Financial Group (8316.T), Mizuho Financial Group (8411.T), Mitsubishi UFJ Financial Group (8306.T), and the Development Bank of Japan—have already submitted or intend to submit commitment letters for the funding by Friday.
Because the material is private, they declined to give their names. According to one of the persons and a different source, SK Hynix (000660. KS), a significant Kioxia investor and competitor, is wary of the proposed acquisition because it worries it will strengthen its rivalry.
However, the first four sources claimed that worries about China or SK Hynix, the third-largest manufacturer of NAND flash memory chips, are not influencing the banks’ choices to finance the purchase.
As a part of the Bain-led consortium that purchased Kioxia from Toshiba Corp. for 2 trillion yen in 2018, SK Hynix made an investment in Kioxia totaling 395 billion yen. It owns convertible bonds with a 15% maximum equity conversion rate in Kioxia.
The merger of Western Digital’s fourth-ranked flash company and Kioxia, the No. 2 player in the world for NAND flash memory chips, would dominate a third of the NAND flash market, matching the market share of leader Samsung Electronics (005930. KS).
According to the sources, the finalized agreement would make Western Digital the main owner of the merged business.
The combined business will be listed on the Nasdaq market, but one of the sources stated that it will eventually try to list in Tokyo. According to the source, it will be led by Nobuo Hayasaka, the current Kioxia chief.
Since 2021, Kioxia and Western Digital have been negotiating to merge, but the talks have frequently stopped due to several factors, including valuation disagreements.
NAND flash memory chips, which are extensively used in smartphones, personal computers, and other devices to store digital data, are jointly produced in Japan by the two businesses.
The Development Bank of Japan, Mitsubishi UFJ, Kioxia, and Mizuho declined to comment. Western Digital and Sumitomo Mitsui did not immediately respond to requests for comment from Reuters. SK Hynix made no comments.
Comment Template