Western Digital Corp. and Kioxia Holdings Corp. — after months of talks — aim to reach a merger agreement by August, according to people familiar with the matter.

The deal would be structured as a tax-free spinoff of Western Digital’s flash business, which would merge with Kioxia, said the people, who asked to not be identified because the details are private. Western Digital shareholders would own slightly more than 50% of the merged entity, the people said.

Shares of Western Digital, which had fallen more than 14% in the past year, rose as much as 6.5% in trading Friday. The shares closed up 0.8% to $39.66 in New York, giving the company a market value of about $12.7 billion.

The company would be run by Kioxia executives on a day-to-day basis, with Western Digital executives also being involved, the people added. Financing is in place, they said.

Both chipmakers would have board representation and the combined company would be domiciled in Japan, they said. The merged entity would trade on the Nasdaq initially but eventually list in Tokyo, they said. Bain Capital, which backs Kioxia, would be paid a special dividend, they said.

A final agreement hasn’t been reached and the timing could change, or talks could still end without one, the people added. Closely held Kioxia, also backed by Toshiba Corp., was spun out of Toshiba in 2018.

Representatives for Western Digital and Bain declined to comment. Kioxia and Toshiba didn’t immediately respond to requests for comment.

The companies, which have a joint venture that produces flash chips, have been circling each other for years and joining forces would help them take on Samsung Electronics Co.

Last year, Western Digital announced a review of strategic alternatives following talks with activist investor Elliott Investment Management. Bloomberg News reported in January that Western Digital and Kioxia had revived merger talks, after discussing a pairing in 2021.

By: DocMemory
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