In a surprising development, SK Hynix, a major shareholder of Kioxia, has expressed opposition to a potential merger between Japanese company Kioxia and Western Digital, two of the world’s largest memory chip companies. The South Korean chipmaker made this statement during its recent earnings call, stating that it does not agree to the combination due to concerns over the impact on the value of its investment in Kioxia.
Key Takeaway
SK Hynix, a major shareholder of Kioxia, opposes the merger between Western Digital and Kioxia, citing concerns over the impact on the value of its investment in Kioxia. The potential deal between the two memory chip companies, if successful, would create the world’s largest NAND flash memory maker. However, obtaining approval from shareholders and regulators in different markets remains a challenge.
Although Western Digital and Kioxia have not officially confirmed any merger talks, SK Hynix’s opposition adds weight to the negotiations. SK Hynix’s Chief Financial Officer, Woohyun Kim, said, “We cannot elaborate on further specific reasons and the progress of the merger due to confidentiality, but one thing is clear: we [SK Hynix] will make a decision for all stakeholders, including shareholders and Kioxia.”
A potential merger between Western Digital and Kioxia would create the world’s largest NAND flash memory maker and allow the combined entity to better compete with industry giants such as Samsung and SK Hynix themselves. This move would also enhance the company’s ability to compete with Chinese memory chip manufacturers.
Deeper Integration in the Works
Western Digital and Kioxia have been working together in a joint venture since 2022, and rumors of a deeper tie-up have been circulating since 2021. Recent reports indicate that the results of their efforts to merge could be announced as early as this month.
SK Hynix’s opposition comes on the heels of a recent report by Nikkei, which claimed that SK Hynix had approached Japan’s SoftBank for a partnership in the event that the Western Digital and Kioxia merger fell through. However, SK Hynix denied these rumors.
To finance the potential merger, Western Digital and Kioxia are reportedly in talks with top Japanese banks to secure 1.9 trillion yen (nearly $13 billion). This move suggests the seriousness of their intentions. Names such as Sumitomo Mitsui Financial, Mizuho Financial, Mitsubishi UFJ Financial, and the Development Bank of Japan have been mentioned as potential lenders. Kioxia has also approached Japan Investment Corp (JIC) for financial support.
However, before moving forward with the merger, both companies need approval from their respective shareholders. Additionally, obtaining regulatory approvals from different markets, including China, remains a challenge.
In conclusion, the opposition from SK Hynix, a major shareholder of Kioxia, throws a wrench into the potential merger between Western Digital and Kioxia. This development adds more complexity to the negotiations and leaves the future of the merger uncertain. Both companies will need to carefully consider the concerns of all stakeholders before moving forward.
