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.
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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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By GlobalDataThe 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.
