Hitachi Shares Jump on $4.3 Billion Sale of Hard Drive Unit
Shares of Hitachi gained Tuesday after the Japanese electronics conglomerate agreed to sell its hard disk drive unit for $4.3 billion to Western Digital Corp.
Under the transaction, the world’s No. 2 hard drive maker, Western Digital, will pay $3.5 billion in cash and $750 million in stock for Hitachi Global Storage Technologies.
Hitachi had been looking to list its unit to tone down its involvement in volatile businesses.
The unit was born out of Hitachi’s $2 billion purchase of the hard drive business of IBM in 2002, but saw five years of losses until turning an operating profit in 2008 and 2009.
Western Digital hopes the move will arrest a margin-slicing price war and make it the global leader with the resources to develop costly next-generation storage technology.
The largest tech deal to be struck this year caps years of consolidation for a beleaguered industry that has battled persistent sales growth declines, and now faces a longer-term threat from wireless devices like Apple’s iPad.
Western Digital’s stock soared Monday, although creation of such a dominant industry force – controlling about 50 percent of the market — is sure to invite antitrust scrutiny.