The takeover of SanDisk by Western Digital for USD 19 billion has come under fire from a Western Digital shareholder for being too expensive.
Alken, a London hedge fund that’s among Western Digital’s top-ten shareholders, said in a letter sent to the company board that it will vote against a stock offering the company may need to complete the deal. Alken, which owns about 2.2 percent of Western Digital, points to a lowered outlook for SanDisk since the deal was agreed last fall. Neither Western Digital nor SanDisk was immediately available for comment.
Alken said in the letter that the acquisition price is just too high when looking at the changes in SanDisk’s markets and business as well as capital market factors. The shareholder added that the breakup fee of USD 185 million is “relatively small”. Alken has been invested in Western Digital since 2010 and lauds the company’s management in the letter.
During a conference call in late January, Western Digital executives defended the deal amid questions from analysts about the markets for SanDisk products, the Wall Street Journal reported. CEO said the company had expected volatility and run several “stress tests” on SanDisk results and remains comfortable with the deal. Since the deal was announced in October, Western Digital shares have fallen around 40 percent, with the company’s market value falling to just over USD 10 billion.
In a separate transaction announced in September, Western Digital is selling a 15 percent stake to an arm of China’s Tsinghua Unigroup. That deal, worth USD 3.8 billion, would help finance the nearly all-cash SanDisk acquisition, but is awaiting approval from US regulators including the Committee on Foreign Investment in the US. If it does not close by the time the SanDisk deal completes, Western Digital will need to issue more shares to SanDisk. The extra shares would trigger a requirement that Western Digital get shareholder approval.
