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Western Digital Buys Komag For $1 billion

Western Digital Buys Komag For $1 billion

PC components Jun 29,2007 0

Western Digital has agreed to buy component maker Komag Inc. for about $1 billion in cash, the companies said on Thursday. The proposed merger comes amid a sharp fall in prices in the highly commoditized computer disk-drive industry, once one of the bedrock manufacturing sectors in Silicon Valley.

Western Digital would pay $32.25 a share for all of the outstanding shares of Komag, a supplier of the thin-film media that finished products maker Western uses to make disk drives.

The Komag deal comes four years after Western Digital acquired part of bankrupt disk drive parts maker, Read-Rite, which supplied the mechanical heads used to read data on drives.

"This acquisition is a significant step in the evolution and differentiation of WD as a leader in the worldwide hard drive industry," said John Coyne, WD President and Chief Executive Officer. "Following the successful integration of the Read-Rite head assets since 2003, we are very excited by the opportunity to drive incremental profitability and efficiencies in the WD business model through the full integration of Komag's media operation. This acquisition will enable WD to optimize synergies through the integration of heads and media, secure our long-term supply of media, and sharpen our ability to deliver high quality, highly reliable and cost-effective products to our customers. We believe that Komag's highly-skilled employees, an industry-leading position with perpendicular magnetic recording media, and its operational excellence will further strengthen WD's competitive position. Together, we have the right team to deliver on WD's strategy to achieve profitable growth."

So-called Winchester disk drives -- the basic technology used for storage in personal computers, laptops and a range of consumer electronics -- was invented in Silicon Valley by IBM researchers in the 1970s.

IBM sold most of its own disk drive business to Hitachi in 2003. Seagate acquired Maxtor, another of the remaining independent disk drive makers last year.

Western Digital plans to fund the transaction, including the expected retirement of Komag's convertible debt due in 2014, through cash from the combined company and a senior secured term loan of up to $1.25 billion.

The transaction is expected to close in the third quarter.

Unusual trading in options positions ahead of the deal that would benefit from a rise in Komag shares looked "suspicious," an options analysts indicated on Thursday, according to a Reuters report.

Tags: Western Digital
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