SK Hynix confirmed on Thursday that it opposes the merger of Japan's Kioxia Corp and U.S.-based Western Digital Corp, bringing more uncertainty to the landmark deal that has been years in the making. It was reported earlier this month that SK Hynix opposed the merger and was considering investing in Kioxia in partnership with Japan's SoftBank Group. SK hynix later issued a statement saying that the content of the report "is not consistent with the facts."
But SK Hynix Chief Financial Officer Kim Woohyun told analysts on a conference call after the earnings report on Thursday that the deal undervalued its stake in Kioxia and that SK Hynix "does not agree to the transaction at this time" given the impact on the overall value of the company's investment in Kioxia.
Western Digital and Kioxia have discussed a possible merger for years, but discussions have revolved around issues of control, leadership, economics and politics. In theory, merging the two companies would help them compete with the largest players in the memory chip industry.
The two companies are currently seeking to conclude negotiations this month and hope to announce a deal before Western Digital reports earnings on October 30. Kioxia has contacted Japan Investment Corp., hoping to inject capital to speed up the transaction process.
When a consortium led by Baincapital acquired a controlling stake in Kioxia from Toshiba Corporation, SK Hynix became an indirect shareholder in Kioxia. It is unclear how SK Hynix’s opposition will affect the outcome of the acquisition.
Bain Capital and Kioxia are working on a solution that could lead to a deal being announced despite objections from SK Hynix, according to people familiar with the matter. Although many people said that SK Hynix had no veto power over the transaction, others said that as a major investor, SK Hynix must obtain its consent.
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