Western Digital and Hitachi, Together at Last

Consolidation is afoot in the hard-disk drive industry.

Almost exactly a year ago to the day, hard drive titan Western Digital (NYS: WDC) announced its intention to acquire the data storage business unit of Hitachi (NYS: HIT) . A mere month later, rival Seagate (NYS: STX) similarly stated that it would take Samsung's HDD business off of the South Korean conglomerate's hands.

Late last year, Seagate and Sammy sealed the deal, giving Samsung a sizable 9.6% stake in Seagate along with a board seat nomination. Western Digital and Hitachi have now closed the acquisition after clearing antitrust regulatory muster. As a condition to earn regulators' seal of approval, Western Digital will set up two separate subsidiaries to operate under separate brands and products.

The deal includes $3.9 billion in cash and 25 million shares of Western Digital shares worth about $900 million, which gives Hitachi a roughly 10% stake in Western Digital. On top of that, Hitachi has the right to designate two directors to Western Digital's board. Sounds awfully familiar, doesn't it? Western Digital financed a sizable chunk of that cash portion with a $2.3 billion loan, but expects to maintain a positive net cash position.

Overall, the deal is worth about $4.8 billion, and Hitachi will recognize a nice gain of about $2.4 billion on the transaction. This will benefit the company significantly, as the Japanese conglomerate has been looking to lose a little weight recently.

Western Digital expects the deal to be immediately accretive to non-GAAP earnings, which excludes pesky acquisition-related expenses, restructuring charges, and amortization of intangibles. In other words: If you ignore all the costs of the deal, it looks great!

The acquisition should make Western Digital stronger, but it's still not The Motley Fool's Top Stock of 2012. That title goes to a growing retailer that's tapping into emerging markets south of the border. Get this free report now while you still can.

At the time this article was published Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Western Digital. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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