Western Digital buys Hitachi GST for $4.3bn

Western Digital (WD) has bought storage competitor Hitachi GST in a cash and stock deal that values the company at $4.3bn.

Under the terms of the deal WD will pay $3.5bn in cash and 25 million shares valued at $750m.

WD's current chief executive, John Coyne, will head the merged company, with Hitachi GST's former chief executive, Steve Milligan, becoming president.

"The acquisition of Hitachi GST is a unique opportunity for WD to create further value for our customers, stockholders, employees, suppliers and the communities in which we operate," said Coyne.

"We believe this step will result in several key benefits - enhanced R&D capabilities, innovation and expansion of a rich product portfolio, comprehensive market coverage and scale that will enhance our cost structure and ability to compete in a dynamic marketplace."

Hitachi has strengths in markets like enterprise SSD and high capacity drives that WD lacks, and the deal will allow the two companies to enjoy better economies of scale for production.

"The enterprise HDD market garners significantly higher margins than the consumer segment, which makes the enterprise a fast-growing market for HDD revenue," said Fang Zhang, storage systems analyst at IHS iSuppli.

"To date, WD has largely been absent from the enterprise segment. However, Hitachi GST brings WD the essential technology, product portfolio and experience required to compete in the enterprise segment."

The deal follows large-scale consolidation in the storage market over the past year, with Toshiba acquiring Fujitsu's hard drive business last year and WD and Hitachi rumoured to be considering a bid for Seagate.

"As the former chief executive of Hitachi GST, I always believed in the potential of Hitachi GST to become a larger and more agile company," said Hiroaki Nakanishi, president of Hitachi.

"It is important to us that WD shares common values with Hitachi GST to create a more global company that is well positioned to define a broader role in the evolving storage industry."