Western Digital's acquisition of Kioxia from Bain Capital and Toshiba, forming a huge maker of 3D NAND memory may be getting closer. It seems that major Japanese banks are gearing up to offer a loan of ¥2 trillion ($14 billion) to the American company, according to a Bloomberg report. This move can be considered as a significant step towards the merger, which has experienced several setbacks.
Three Japanese banks — Sumitomo Mitsui Financial Group, Mizuho Financial Group, and Mitsubishi UFJ Financial Group — are at the forefront of this financing initiative. They are set to present a commitment letter in October. Of the total loan amount, ¥400 billion is expected to be sourced through loan commitments. The lion's share of the loan, ¥1.3 trillion, will be divided equally among these three banks, while the Development Bank of Japan will contribute the remaining ¥300 billion.
A portion of this loan is intended to distribute special dividends to Kioxia’s present shareholders, Bain Capital and Toshiba, which own 56.24% and 40.64% of the company, respectively. In the proposed merger structure, Western Digital is set to control about 50.5% of the combined entity, leaving Kioxia with the residual 49.5%. Meanwhile, management of the combined entity will reportedly be led primarily by Kioxia's executive team, even though there will also be people from Western Digital as well.
However, the merger is not without its challenges. The discussions, initially targeted for conclusion in August, have been prolonged due to intricate details. There's a looming uncertainty about the merger's finalization, with concerns that it might either be postponed further or not materialize at all. If the latter occurs, the banks have indicated they will not proceed with the discussed loan. Adding to the complexity of the merger talks is Toshiba's impending buyout.
In the first quarter of 2023, Kioxia held a 21.5% market share in NAND memory, and Western Digital had a 15.2% share, as reported by TrendForce. Meanwhile, Samsung accounted for 34% of the NAND memory market during that timeframe. Considering these figures, the potential combined force of Kioxia and Western Digital in the flash sector is poised to emerge as the top NAND memory supplier globally, boasting a market share exceeding 36.7%.
