Western Digital Yields To Activist Shareholder, Looks At Franchise Split

Western Digital Corporation (Nasdaq: WDC) announced that the firm would be conducting a review of its “strategic alternatives,” including the possible split of its flash memory and traditional hard disk drive franchises. This move follows the clamor of its major activist shareholder Elliott Investment Management to separate the entities.

“The Board is aligned in the belief that maximizing value creation warrants a comprehensive assessment of strategic alternatives focused on structural options for the company’s Flash and HDD businesses,” said CEO David Goeckeler. “We look forward to continuing our constructive dialogue with Elliott as this process unfolds.”

After the announcement, the digital storage firm enjoyed a 4.2% spike in its shares pre-market before crashing back down deeper than its rise, bordering lower than its last trading price.

On the other hand, the investment firm, one of Western Digital’s largest shareholders, praised the move, saying it is “pleased that [the board] is conducting this review.”

“Western Digital is strongly positioned in an industry that represents a compelling growth opportunity, and we have confidence in David and his management team’s execution, strategic vision, and focus on shareholder value,” said Elliott Managing Partner Jesse Cohn and Senior Portfolio Manager Jason Genrich.

But beyond the agreement reached by both parties, it seems Elliott’s “offer to invest incremental equity capital” in the flash memory business should the split happen has been instrumental in the negotiations.

“Elliott is prepared to provide strategic resources and additional capital to help the company realize the full value of both of its businesses,” Cohn and Genrich added.

As part of the review, both parties inked a customary non-disclosure agreement.

Western Digital last traded at US$60.32 on the Nasdaq.

Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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