Western Digital closes SanDisk buyout, guarantees 1.5% and 0.5% convertible notes

By Susanna Moon

Chicago, May 12 – Western Digital Corp.’s wholly owned subsidiary, Western Digital Technologies, Inc., closed its acquisition of SanDisk Corp. on Thursday and became guarantor of two series of its convertible notes, according to an 8-K filing with the Securities and Exchange Commission.

On Thursday, the companies entered into a supplemental indenture to SanDisk’s $996.7 million principal amount of 1.5% convertible senior notes due Aug. 15, 2017 and $1.5 billion principal amount of its 0.5% convertible senior notes due Oct. 15, 2020.

Under the supplemental indentures, Western Digital assumed and became jointly and severally liable with SanDisk for the notes.

After the merger, the right to convert the SanDisk notes was changed to a right to convert the principal amount of SanDisk notes on the basis of the amount of reference property, consisting of 0.2387 shares of Western Digital common stock, and $67.50, that a holder of a number of shares of common stock of SanDisk equal to the conversion rate immediately prior to the merger would have owned or been entitled to receive upon the completion of the merger.

The merger constitutes a fundamental change under the notes indenture. As a result, the conversion rate for each $1,000 of principal amount of SanDisk notes from March 8 through June 9 will be increased by 1.0702 additional units of reference property to a total of 20.8004 units for the 2017 convertibles and 2.8720 additional units for the 2020 convertibles to a total of 13.7726 units.

The conversion rate after June 9 will be 19.7302 units for the 2017 convertibles and 10.9006 units for the 2020 convertibles.

In addition, as a result of the merger, the notes are putable at par for a principal amount equal to $2,000 or an integral multiple of $1,000 after that on June 10.

As announced March 1, SanDisk told the holders of its 1.5% convertibles and 0.5% convertibles that it expected its planned merger with Western Digital to close April 20 and that it constituted a fundamental change under the note terms.

Western Digital, an Irvine, Calif.-based maker of storage solutions for digital content, had agreed to purchase SanDisk, a Milpitas, Calif.-based maker of flash storage cards, for $86.50 per share, or a total equity value of about $19 billion.

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