Tsinghua Unisplendour Co Ltd (Unis) announced on Wednesday that it invested $3.78 billion in Western Digital Corp, purchasing a 15 percent stake (which it must hold for five years) at a premium price of $92.50—33 percent higher than Western Digital’s closing price on Tuesday. The investment gives Unis the right to nominate a representative to the Western Digital board of directors.
Unis, a subsidiary of state-owned Tsinghua Holdings Co Ltd, is a public-traded company specializing in information technology and communications. Tsinghua Holdings’ investment in Western Digital marks its second billion-dollar investment this year in an effort to boost its technological capabilities in data-networking and storage sector. Tsinghua Holdings had previously partnered with Hewlett-Packard Co and Microsoft Corp on their storage and networking operations.
The investment from Unis will strengthen Western Digital’s balance sheet, allowing it to finance its “long-term strategic growth initiatives.” According to Western Digital CEO Steve Milligan, the Unis investment would help Western Digital reach the Chinese market. Cooperation with Tsinghua might help Western Digital gain a favorable ruling from Chinese Ministry of Commerce (MOC) for its 2012 acquisition of Hitachi Ltd’s hard drive division. MOC had previously approved the deal under the condition that the two firms operate separately.
Western Digital believes that Unis’ non-controlling stake is not subject to a Committee on Foreign Investment in the United States (CFIUS) review, but had filed with CFIUS “out of an abundance of caution.” The Unis representative at Western Digital would be restricted from sensitive issues like government contracts. A previous attempt by Tsinghua to acquire the US memory chip manufacturer Micron Technology Inc was believed to have failed due to bleak prospects of US regulatory approval.