The purchase steps up WDC’s game in an increasingly competitive hard drive market. WDC has been the second largest hard drive company for some time and recently was estimated by iSuppli to hover at a market share level of 20.5%, trailing Seagate that is estimated to hold just under 35%. However, WDC has achieved its position without actually developing and manufacturing hard drive disks, which the company typically purchased from third-party suppliers such as Showa Denko.
The acquisition of Komag takes WDC to the same level as its competitors such as Seagate, Hitachi GST, Samsung and Toshiba. The companies agreed on a purchase price of $32.25 per share, which translates into a total price of about $1 billion.
WDC said that the transaction will be structured as a cash tender offer for all the outstanding shares of Komag common stock, followed by a merger of a wholly-owned subsidiary of WDC into Komag in which the remaining shareholders of Komag will receive $32.25 in cash. The purchase price will be paid through a combination a combination of cash as well as the proceeds from a senior secured term loan of up to $1.25 billion.
The transaction is expected to close in Q3 of this year.