Western Digital stock gains on report Japan may back Kioxia merger

Western Digital (WDC) shares moved higher Friday amid reports that the chipmaker is on track to get Japanese government approval for a possible $ 20 billion (U.S.) merger with flash memory manufacturer Kioxia.

Kioxia, which was sold by Toshiba Corp. to a private equity consortium lead by Bain Capital in 2018, is one of the world’s biggest NAND chipmakers in the world and a key supplier to Apple Inc.’s AAPL iPhones. It also competes with South Korea’s Samsung Electronics and SK Hynix, which bought Intel Corp.’s (INTC) flash memory business last yea for around $ 9 billion.

A tie-up with Western Digital, which failed to buy the chipmaker when it was sold to Bain in 2018 but remains a manufacturing partner, could both vault the San Jose-based group into the global chipmaking elite while simultaneously ensuring that Japan’s Kioxia isn’t neutralized by its Asia-based rivals nor shut out of key markets in China. The combined group would have a collective 40 per cent share of the global NAND market.

Reuters reported Friday that Japan’s Ministry of Economy Trade and Industry could approve a Western Digital takeover, provided it gives assurances that sensitive technical information remains protected.

Western Digital shares were marked 0.8 per cent higher in early trading Friday, against a 0.2 per cent gain for the Nasdaq, to change hands at $ 62.12 each, a move that would extend the stock’s year-to-date gain to around 13 per cent.

Any path to a full Western Digital merger remains uncertain, however, as reports continue to suggest that Toshiba, which owns around 40 per cent of Kioxia, and Bain Capital prefer a straight IPO to a tie-up with a foreign buyer.

Western Digital may also need to improve the anticipated $ 20 billion price tag, which most analysts assume will be paid in company stock, in order to win over both Kioxia management and its private-equity backers.

TORONTO STAR