Western Digital cuts SanDisk offer after China deal collapses

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Western Digital Corp (WDC.O) said on Tuesday it cut the price of its planned acquisition of rival U.S. hard-disk maker SanDisk Corp (SNDK.O) by more than $3 billion after losing a big investment from China's Unisplendour Corp Ltd (000938.SZ).

Unisplendour, a unit of China's state-backed Tsinghua Holdings Co Ltd [TSHUAA.UL], scrapped its plan to buy a 15 percent stake in Western Digital for $3.78 billion after the U.S. Committee on Foreign Investment said it would investigate the transaction.

Western Digital shares were down 6.7 percent in afternoon trading, while SanDisk fell 2.6 percent.

The collapse of the Unisplendour deal comes during a wave of Chinese takeover interest in U.S. corporations that has already hit a record volume of $23 billion in announced offers this year, according to Thomson Reuters data.

"hard-disk maker SanDisk Corp (SNDK.O) by more than $3 billion after losing a big investment from China's Unisplendour Corp Ltd (000938.SZ).Unisplendour, a unit of China's state-backed Tsinghua Holdings Co Ltd [TSHUAA.UL], scrapped its plan to buy a 15 percent stake in Western Digital for $3.78 billion after the U.S"That is nearly double the full-year record reached in 2013.

But China's U.S. ambitions are receiving increased scrutiny from U.S. politicians, who are concerned about putting certain national businesses in the hands of Chinese executives and government officials.

Western Digital, which reached a deal to buy SanDisk for $19 billion in October, said at the time that it would revise the cash-and-stock offer if the Unisplendour investment fell through.

With Unisplendour out, the company said it would now pay $78.50 per share in cash and stock for SanDisk, down from the deal price of $86.50 but above Tuesday's share price of $66.40. The value of the current offer is $15.78 billion.

"I think if you are a Western Digital shareholder, the deal makes a lot of strategic sense," said Pacific Crest Securities analyst Monika Garg.

SanDisk did not immediately respond to requests for comment.

ACTIVIST SHAREHOLDER

Western Digital's move to proceed with the SanDisk deal comes the day after shareholder Alken Asset Management urged the company to scrap it, saying the price was too high.

"We have laid out our case in reasonable details in the letter so there is not much to add," Alken analyst Vincent Rech said in an email. The London-based fund is pleased with the support it has received, he added.

Western Digital said U.S., European Union and other regulators had approved the SanDisk deal.

CFIUS, an inter-agency panel led by the Treasury Department, assesses potential mergers to ensure they do not endanger national security. The panel rarely kills the deals, but several times a year it has informally urged companies to scrap merger plans, and they have complied.

China led the countries whose planned U.S. acquisitions and investments for 2014 were probed for security issues, according to a government report.

In January, Philips (PHG.AS) dropped a plan to sell an 80 percent stake in its Lumileds division to a group that included Chinese investors because of pressure from CFIUS.

Fairchild Semiconductor International Inc (FCS.O) said last week that it rejected an offer from a Chinese takeover group, citing concerns that U.S.

"Committee on Foreign Investment said it would investigate the transaction.Western Digital shares were down 6.7 percent in afternoon trading, while SanDisk fell 2.6 percent"regulators would stop the sale.

U.S. lawmakers are also pushing for the rejection of a Chinese company's plan to buy the Chicago Stock Exchange.

(Additonal reporting by Sweta Singh in Bengaluru and Diane Bartz in Washington; Editing by Anil D'Silva and Lisa Von Ahn)