Japan banks set to commit $12.7 billion financing for Kioxia-WDC merger

By Miho Uranaka, Makiko Yamazaki and Maki Shiraki

TOKYO (Reuters) – Japan’s top banks are set to commit to 1.9 trillion yen ($12.7 billion) financing to support the merger of Kioxia Holdings and Western Digital’s flash memory business, four people familiar with the matter told Reuters.

The financing support would move a step closer to closing the deal that would create one of the world’s biggest memory chipmakers, but it is almost certain for the transaction to face heavy anti-trust scrutiny, particularly from China.

Several tech deals have been scuppered in recent years due to delays in regulatory approvals or rejections by China. In August, Intel Corp scrapped its $5.4 billion offer for an Israeli contract chipmaker after their merger deal expired without regulatory approval from China.

Four Japanese banks – Sumitomo Mitsui Financial Group, Mizuho Financial Group, Mitsubishi UFJ Financial Group and the Development Bank of Japan – have either already submitted commitment letters for the financing or plan to do so by Friday, three of the people said.

They declined to be identified because the information is not public.

The potential deal also faces reluctant SK Hynix, a major Kioxia investor and rival, as the South Korean firm fears the deal would create a stronger competitor, one of the people and a separate source said.

However, concerns about China or the position of SK Hynix, the world’s No.3 maker of NAND flash memory chips, are not impacting the banks’ decisions to finance the deal, the first four sources said.

SK Hynix invested 395 billion yen in Kioxia in 2018 as a member of a Bain-led consortium that bought the Japanese firm from Toshiba Corp for 2 trillion yen. It holds convertible bonds that can be converted into an equity stake of up to 15% in Kioxia.

The combination of Kioxia – currently the world’s No. 2 player in NAND flash memory chips – and Western Digital’s fourth-ranked flash business, would control a third of the global NAND flash market, on par with top player Samsung Electronics.

The finalised deal would likely see Western Digital a majority owner of the combined company, the sources said.

The merged company will be listed on the Nasdaq market, but will aim for listing in Tokyo in the future, one of the sources said. It will be headed by Kioxia’s incumbent chief Nobuo Hayasaka, according to the source.

Kioxia and Western Digital have held merger talks since 2021 but the negotiations have often stalled over a series of issues including valuation discrepancies.

In Japan, the two companies jointly produce NAND flash memory chips, which are widely used in smartphones, personal computers and other devices to store digital data.

Kioxia, Mitsubishi UFJ, Mizuho and the Development Bank of Japan declined to comment. Reuters could not get immediate comments from Sumitomo Mitsui and Western Digital.

SK Hynix declined to comment.

($1 = 149.8200 yen)

(Reporting by Makiko Yamazaki, Miho Uranaka, Maki Shiraki; Editing by Miyoung Kim and Tomasz Janowwski)