Western Digital-Kioxia Deal Talks Stall

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Last Updated, Oct 21, 2021, 10:20 PM

talks to merge with Japanese chip maker Kioxia Holdings Corp. in a $20 billion-plus deal have stalled, according to people familiar with the matter.

The companies, which had been speaking since early this year, were working to finalize a stock deal that would have created a memory-chip powerhouse worth something on the order of $40 billion, The Wall Street Journal reported in August. Though the talks are on hold now, they could still be revived, some of the people said.

One factor that played a role in the deal stumbling was a steady decline in Western Digital’s shares, which have dropped more than 25% from their high for the year in early June. They closed Thursday at $56.80, giving the company a market value of $17.7 billion.

A proposed Western Digital-Kioxia transaction was expected to face tough regulatory scrutiny. It would require the blessing of the Japanese government and China, which has been increasingly aggressive in its antitrust enforcement.

Kioxia had also been considering an initial public offering.

Photo:

Fang Zhe/Xinhua/Getty Images

Kioxia makes so-called NAND flash-memory chips used in smartphones, computer servers and other devices. It already has deep ties with Western Digital, which helped the American company get into pole position to do the deal this summer, ahead of

Micron Technology Inc.,

which had also been exploring a deal for the Japanese chip maker.

Western Digital, which makes hard-disk drives, has a joint venture with Kioxia for manufacturing and research and development that was set to expire starting in 2027.

Kioxia also has been eyeing an initial public offering, though those plans are on hold for now, one of the people said. Western Digital is set to report its fiscal first-quarter earnings on Oct. 28.

Kioxia, formerly part of

Toshiba Corp.

and known as Toshiba Memory, was purchased in 2018 by a group led by private-equity firm Bain Capital for around $18 billion. Toshiba retained a 40% stake in the business, which was renamed Kioxia the following year.

A global chip shortage is affecting how quickly we can drive a car off the lot or buy a new laptop. WSJ visits a fabrication plant in Singapore to see the complex process of chip making and how one manufacturer is trying to overcome the shortage. Photo: Edwin Cheng for The Wall Street Journal

Write to Cara Lombardo at cara.lombardo@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

Appeared in the October 22, 2021, print edition as ‘Major Chip Makers’ Deal Talks Stumble.’

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