Merger talks between Japanese memory chip maker Kioxia and US-based Western Digital are speeding up, reported Reuters, citing sources aware of the development.
Kioxia and Western Digital are reeling under the mounting pressure of weak demand and oversupply.
By merging their businesses, the memory chip makers hope to increase competition in the market, which is dominated by South Korea’s Samsung Electronics.
According to a source, under the new plan being developed, Kioxia would hold a 43% stake in the merged entity and Western Digital would hold 37%.
The remaining portion would be owned by the existing shareholders of the companies, the source added.
A final decision is yet to be made and the specifics of the plan could still change, the source cautioned.
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The proposed merger may also be subject to antitrust inquiry in several jurisdictions, including China and the US.
A representative for Kioxia declined to respond to speculations and Western Digital did not immediately answer a request for comments.
Elliott Management, an activist investor holding convertible preferred shares in Western Digital, has been advocating for the separation of its flash-memory business from its hard-drive division.
This push began after their initial stock investment in the US memory chip maker last year.
Such a separation would happen before combining the flash memory business with Kioxia, a source suggests and added that the merged entity might consider going public after the deal.
Toshiba sold Kioxia (formerly Toshiba Memory) to a consortium led by Bain Capital for $18bn, in 2018.
Kioxia’s plans for an initial public offering (IPO) were put on hold due to the declining flash-memory market, and Toshiba still retains a 40.6% stake in the company.
Elliott also owns a stake in Toshiba.
If the deal goes through, Kioxia and Western Digital would have a third of the world’s NAND flash market, matching Samsung, the market leader.