The deal is pretty complex, which makes it less attractive to shareholders who think it will make them a quick buck.
Western Digital said the value of the transaction hinges on the closing of an investment in the company by Unisplendour which is a unit of Chinese government’s state-backed Tsinghua Holdings.
Unisplendour said it would buy 15 percent of Western Digital for $3.78 billion, a deal that is likely to face regulatory scrutiny amid national security concerns.
Western Digital Chief Executive Steve Milligan said in an interview that the SanDisk acquisition will ultimately dilute Unisplendor’s stake and that he was confident it would be approved by regulators.
“There’s always a risk and you’re not done until you’re done, but we were careful and consulted with US government experts,” he said.
Research firm Gartner said in October that worldwide semiconductor sales are expected to fall for the first time in three years in 2015, due partly to increasingly saturated market for smartphones.
Western Digital needs access to SanDisk’s NAND technology to better compete in the market for SSDs used in cloud computing, data centres, smartphones and laptops.
Western Digital said it had the support of SanDisk partner Toshiba which had some rights that could block a deal.
SanDisk has an intellectual property sharing joint venture with the Japanese company and uses its foundries to make chips.
Toshiba spokeswoman Midori Hara said in an email that the deal would not have a negative impact on that joint venture.