Western Digital cleared to buy Hitachi disk drive business
(Reuters) - Western Digital has secured conditional approval from the European Union's competition regulator to purchase Hitachi's hard disk drive business for $4.3 billion, after it agreed to sell several production operations.
Context & Ripple Effects
Western Digital's $4.3 billion purchase of Hitachi's hard disk drive business has cleared its biggest regulatory hurdle: the European Union's competition regulator granted conditional approval on November 23, 2011, in exchange for Western Digital agreeing to sell off several production operations. The divestiture is the price of closing a deal that would fold one of the industry's major drive makers into another.
The approval lands just days after a confirmed report that Western Digital stands accused of misappropriating Seagate's confidential information in a long-running arbitration dispute — meaning the company is simultaneously absorbing a rival's drive business and fighting its chief competitor in court.
First-order effects
- Western Digital can proceed toward closing the Hitachi acquisition, but only by divesting several production operations, immediately shrinking the asset base it actually keeps from the $4.3 billion purchase.
- Hitachi exits standalone hard-drive manufacturing through the sale, while the divested plants pass to new owners under the EU's conditions.
Second-order effects
- Seagate now faces a larger consolidated Western Digital-Hitachi drive operation even as its arbitration fight with Western Digital continues, sharpening a rivalry playing out in both markets and courtrooms.
- PC makers and enterprise buyers sourcing drives from fewer independent manufacturers lose a negotiating alternative, giving the remaining suppliers more pricing leverage.
Third-order effects
- If regulators keep clearing drive-industry mergers only with divestiture conditions, consolidation proceeds anyway — just with carved-out plants sustaining smaller independents — pointing toward an HDD market structured around two dominant players.
- The EU's conditional-approval approach here becomes a template other antitrust authorities weigh when the same deal reaches their desks, making multi-jurisdiction sign-off the binding constraint on storage-sector M&A.
The trend: Hard-disk-drive manufacturing is consolidating into fewer, larger players, with competition authorities extracting divestitures as the toll for each merger.