The details of the agreement look as follows. WD offered $3.5 billion in cash with the rest of the sum settled with 25 million WD shares. These have a market value of $750 million based on the stock price of $30.01 (market closing March 4, 2011). As a consequence, Hitachi will hold about ten percent of Western Digital. The company will to raise $2.5 billion of loans in order to carry out the acquisition, meaning the company will invest "only" around one billion dollars from its own financial reserves. Additionally, two Hitachi representatives get a seat in Western Digital Board of Directors, with the former CEO of Hitachi GST, Steve Milligan, joining as the new president of WD.
Hitachi Global Storage Technologies had a turbulent birth. Back in 2003, Hitachi bought the troubled storage business from IBM and merged it with its own storage business, creating the 3rd largest storage manufacturer. Hitachi was looking for a buyer of the GST division since 2008, because the company could not find a way into profitability. Possibilities included a private equity buyout, as well as forming a new HDD joint-venture
with Toshiba and Fujitsu. Said three-way joint-venture didn't come to pass with the remaining companies forming a joint-venture which were handed over to Toshiba at the end of 2010. Seagate backed out as they were focused on going private
which eventually didn't come true
. At the end of the day, WD was the only prospective player who can make money off the division.
With the acquisition of Hitachi GST, WD now commands 49.6 percent of the HDD market, leaving Seagate behind by 20.2%. Seagate now only captures 29.4 percent of the global storage market, according to iSuppli
. Do note that during 2010, WD already able eclipsed Seagate by small 1-2 percent. The acquisition of Hitachi GST will enable it to take a foothold in the enterprise market, where it previously only had a marginal presence. This also enables the new WD to earn higher margins. The competition will have to react, and now Seagate finds them pressured by Western Digital on both consumer and enterprise storage fronts from one side, and rising Korean giant Samsung Storage from another. What will come of Toshiba? Only time will tell…
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