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Western Digital (WDC) Closes $5.225B Senior Notes Offering

Western Digital Corporation WDC recently closed its earlier announced secured and unsecured notes offerings totaling $5.225 billion. The company had offered $1.875 billion senior secured notes (bearing a rate of 7.375%) maturing in 2023 and unsecured senior notes worth $3.35 billion (bearing a rate of 10.500%) due in 2024.

The net proceeds have been deposited into an escrow account and will be used to fund the SanDisk Corp. SNDK merger, refinance its indebtedness and that of SanDisk, and pay the related fees and expenses. This move is expected to lend flexibility to the company’s balance sheet position, going forward.

Western Digital and SanDisk entered into a definitive agreement on Oct 21, 2015. Per the deal, Western Digital will acquire SanDisk. Notably, the proposed merger moved a step ahead after more than 90% shareholders of both the companies voted in favor of the deal on Mar 15.

The SanDisk acquisition will open growth avenues for Western Digital and help in gaining market traction in advanced storage technology and Solid State Drive (SSD) segment. The merger will lead to economies of scale, lower costs, increase market share and improve product breadth among other things. The company will also offer competitive solutions in cloud-based computing, which has taken the digital storage solution space by storm over the past couple of years.

According to a Bloomberg report, Western Digital had asked lenders this week for an $18 billion leveraged loan to finance its acquisition of SanDisk, as banks showed interest to take on risk. We believe these notes will provide the company financial flexibility to drive long-term growth.

We believe that strategic acquisitions to expand its offerings in the SSD segment should position Western Digital better than peers like Seagate Technologies STX and EMC Corporation EMC.

Currently, Western Digital has a Zacks Rank #3 (Hold).

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WESTERN DIGITAL (WDC): Free Stock Analysis Report
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EMC CORP -MASS (EMC): Free Stock Analysis Report
SANDISK CORP (SNDK): Free Stock Analysis Report
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