Kioxia is looking to refinance a ¥2 trillion ($14 billion) loan arrangement pursuant to its potential merger with Western Digital’s NAND and SSD business unit, at least according to sources who spoke to Bloomberg.
Under pressure from activist investor Elliott Management, Western Digital is examining the possible split of its hard disk drive and NAND/SSD business and the latter’s subsequent merger with Kioxia. Western Digital and Kioxia have a joint venture to operate NAND fabs in Japan, with each taking approximately half the chip output to build SSDs (WD) or sell on raw chips (Kioxia).
The merger discussions have been ongoing since January. The background can be referenced here. Kioxia would own 49.5 percent of the combined business with Western Digital having 50.05 percent.
Kioxia is 56.24 percent owned by a Bain Capital-led private equity consortium and 40.64 percent owned by Toshiba, its original parent. Publicly owned Toshiba is going through a $14 billion buyout process to take it private, and Kioxia’s ability to negotiate with WD may be affected by Toshiba concerns and delayed decisions. Western Digital is also experiencing a downturn in its revenues from a severely depressed disk drive market.
The Japan Times, citing anonymous people close to the situation, reports that Kioxia’s bankers, including Sumitomo Mitsui Financial Group, Mizuho Financial Group, and Mitsubishi UFJ Financial Group, intend to file commitment letters. These banks will provide equal shares of a ¥1.3 trillion ($9.1 billion) amount. The Development Bank of Japan will provide ¥300 billion ($2 billion) and the remaining ¥400 billion ($2.8 billion) will be loan commitments, making up the ¥2 trillion total.
Some of the loan money will fund dividends payable to the existing Kioxia shareholders.
A combined Kioxia/Western Digital NAND business would have a 34 percent revenue share of the NAND market, according to TrendForce numbers from November 2022, more than current market leader Samsung’s 31 percent share. The merger makes market sense in this regard. The merged business would have its stock traded on Nasdaq and also pursue a Tokyo exchange listing.
Neither Bain, the identified banks, Kioxia nor Western Digital responded to Japan Times requests for comments. Kioxia declined to comment to Reuters as did the three named banks.
