Western Digital is planning to raise $3.09 billion by selling its stake in SanDisk. SanDisk is its flash memory business subsidiary that was spun off nearly a year ago. According to people familiar with the matter, the share offering price is set at between US$535 and US$555 per share. Compared with SanDisk's closing price of $590.59 on Tuesday, the discount range is as high as 9.4%.
The share issue has been significantly oversubscribed following a secret roadshow, said the people, who requested anonymity.
SanDisk launched the sale on behalf of its former parent company in a statement on Tuesday but did not disclose the number of shares proposed for sale. The company had previously filed documents with the U.S. Securities and Exchange Commission to register 7.51 million shares for Western Digital, all of its shares.
The statement shows that Western Digital expects to use its SanDisk shares to offset debts held by affiliates of JPMorgan Chase and Bank of America. The relevant banks will sell the shares to the underwriters of this offering, and these banks will also act as representatives of the underwriters.
There are time constraints on the deal: Western Digital must complete the sale of all shares within a year of the SanDisk spinoff to avoid tax costs.
In after-hours trading, SanDisk's stock price fell about 3% to $574.10; Western Digital's stock price was basically unchanged at $283.33.
Spokespersons for Western Digital and SanDisk did not respond to media requests for comment.
SanDisk has benefited from a global shortage of memory chips, which has been caused by a boom in artificial intelligence spending. Surging demand for SanDisk's flash memory products used in computers and mobile phones is expected to significantly boost its sales growth this year.
SanDisk is the best-performing stock in the S&P 500 this year, up 149% as of Tuesday's close.