EC lets WD take over Hitachi hard drive business, with conditions

IDG News Service - Western Digital will be allowed to take over Hitachi's hard-disk drive business, but only if it sells off a 3.5-inch hard-disk drive production plant.

Western Digital announced it has entered into a definitive agreement to acquire Hitachi Global Storage Technologies (GST), the disk drive arm of Hitachi Ltd., in a cash and stock transaction valued at about $4.3 billion.

The ruling was made by the European Commission on Wednesday. Following an investigation, the Commission decided that the merged entity would only face competition from the recently merged Seagate-Samsung. It was feared this lack of competition would force up prices to consumers, hence the ruling that some of Western Digital's production assets be sold off.

"Hard-disk drives are a key component of computers and other sophisticated electronic devices as they are used to store a growing bulk of data in the digital economy. The proposed divestiture will ensure that competition in the industry is fully restored before the merger is implemented," said Competition Commissioner Joaqun Almunia.

However, had Western Digital notified the Commission just one day earlier of its planned takeover of Hitachi's hard-disk drive business, recently renamed Viviti Technologies, it is unlikely to have had to make any concessions. The Commission was notified of the Seagate- Samsung merger one day earlier, on April 19, and approved. But on a "first come, first served" basis the Western Digital takeover had to be assessed in light of that decision.

After the Seagate-Samsung merger, there remained just four active hard-disk drive suppliers worldwide: Western Digital, Hitachi, the merged Seagate-Samsung and Toshiba. The proposed Western Digital-Hitachi transaction would have reduced the number of competitors to three and in some markets to just two.

Western Digital cannot complete the acquisition of Viviti until it has found a suitable purchaser, approved by the Commission, for its 3.5-inch hard-disk drive production assets.

Hard-disk drives store and allow access to data. They are used in desktop computers and laptops, consumer electronics devices such as DVR players, as well as servers and data centers run by companies.

Follow Jennifer on Twitter at @BrusselsGeek or email tips and comments to jennifer_baker@idg.com.