Western Digital, Kioxia quicken merger talks as chip demand slumps

Negotiations for a merger between Western Digital Corp. and Kioxia Holdings Corp. are moving quickly, according to two sources.

The No. 2 and No. 4 players in the world are under new consolidation pressure as a result of a depressed flash memory market.

The US chipmaker Western Digital and Japan's Kioxia have both suffered greatly from the glut and falling market demand. By combining their flash memory businesses, they might be more competitive with rivals like Samsung Electronics of South Korea.

According to the currently under consideration plan, Kioxia would own 43% of the combined company, Western Digital would own 37%, and the remaining shareholders would own the remaining shares.

The sources stated that no decision has been made and that the specifics may change. The proposed merger may also be subject to antitrust investigations in a number of countries, including China and the US.

Since making its initial stock investment in 2022, activist investor Elliot Management, which owns convertible preferred shares in Western Digital, has pushed the US company to separate its flash-memory business from its hard-drive division.

In 2018, Toshiba Corp. sold Kioxia, formerly Toshiba Memory, to a group led by Bain Capital for $18 billion. The deteriorating flash memory market has forced it to shelve plans for an IPO. Kioxia is still 40.6% owned by Toshiba.