Tsinghua to Acquire 15% of Western Digital

The Chinese company continues to emerge from obscurity with a $3.78 billion deal that is its latest collaboration with U.S. tech firms.
Katie Kuehner-HebertSeptember 30, 2015

A unit of Tsinghua Unigroup has agreed to acquire 15% of disk drive maker Western Digital for $3.78 billion in what would be would be China’s biggest technology investment in the U.S.

As The Wall Street Journal reports, state-backed Tsinghau has emerged from obscurity in the past year to strike collaborations with Intel, Hewlett-Packard and Microsoft as U.S. tech companies scramble for politically connected Chinese partners.

Tsinghua’s Unisplendour Corp. unit will pay $92.50 each for newly issued shares of Western Digital, a sharp premium to the company’s closing price Tuesday of $68.87. The stock closed up more than 15%, at $79.44, in trading Wednesday.

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Proceeds from the investment will go toward strengthening Western Digital’s balance sheet, providing financial flexibility and pursuing long-term strategic growth initiatives, Chief Executive Steve Milligan said in a news release.

“The equity investment by Unis will help facilitate our growth as we look to capitalize on the many opportunities and changes within the global storage industry,” Milligan said.

Weiguo Zhao, chairman of both Tsinghua Unigroup and Unisplendour, said the investment would serve “as a constructive collaboration model for Chinese and U.S. companies to work together for success.”

Potential deals between U.S. and Chinese companies stand to face intense scrutiny in both countries amid mutual accusations of “cyber snooping,” according to Reuters.

A former U.S. official said Tsinghua’s deal for Western Digital would “definitely” draw the interest of the Committee on Foreign Investment in the United States. “They’ll take a close look at any technology company that does business with the Department of Defense,” the official told Reuters.

But Western Digital said because Unisplendour is taking only a minority stake, the deal is not expected to face review by the committee.

Tsinghua Unigroup tried to acquire U.S. memory chip maker Micron Technology for $23 billion earlier this year. People familiar with the discussions said talks fell through partly because of the dim prospect of gaining U.S. regulatory approval, according to the WSJ.

The Chinese firm bought a controlling stake in H-P’s China networking equipment unit in May for $2.3 billion.