By Krystal Hu and Eva Mathews
(Reuters) -Western Digital Corp is in advanced talks for a potential $20 billion stock merger with Japanese semiconductor firm Kioxia Holdings Corp, according to a person familiar with the matter.
The companies could reach an agreement as early as mid-September, and Western Digital Chief Executive Officer David Goeckeler would run the combined firm, the source said, who requested anonymity to discuss confidential matters.
The Wall Street Journal reported the talks earlier on Wednesday. The news sent San Jose, California-based Western Digital’s shares up as much as 15% in afternoon trading to a market cap of $21.45 billion.
Kioxia Holdings Corp, the world’s second-largest maker of flash memory chips, last year shelved plans for what would have been Japan’s largest initial public offering in 2020. In June, however, financial magazine Diamond said the company was planning an IPO as early as September.
An IPO is still a possibility should Kioxia fail to reach a deal with Western Digital, the source added.
Western Digital and Kioxia did not immediately respond to requests for comment.
Memory chip makers have seen robust demand driven by new smartphone model launches and 5G expansion. Dominated by five players, the NAND memory market would see further consolidation should a Western Digital and Kioxia tie-up come together.
By joining forces, the two companies could lower costs and better compete with Samsung Electronics Co Ltd (005930.KS), though such a deal is expected to draw antitrust scrutiny, including a signoff from China.
The global chip industry has been rationalising due to the pressures of shortages and trade disputes between Washington and Beijing, triggering supply chain woes for makers of cars and laptops to home appliances and smartphones.
Formerly known as Toshiba Memory, Kioxia was sold by Toshiba Corp in 2018 to a consortium led by U.S. private equity firm Bain Capital for $18 billion. Toshiba still owns about 40.6% of Kioxia, according to its 2020 annual report.
(Reporting by Eva Mathews in Bengaluru and Krystal Hu in New York; Editing by Devika Syamnath and Stephen Coates)