EC greenlights Western Digital's Hitachi buy

European Commission gives go-ahead for Western Digital to ratify Hitachi deal but hard-disk maker needs to sell off some operations before deal can be completed, report states.

Hard-disk drive (HDD) manufacturer Western Digital has been given conditional clearance by the European Commission (EC) to ratify its US$4.3 billion deal to acquire Hitachi Global Storage Technologies, but it needs to sell off some operations to EC-approved buyers first.

The Financial Times (FT) reported on Wednesday that Europe's competition watchdog only agreed to give the go-ahead for the deal following promises made by Western Digital to sell "essential production assets" for 3.5-inch hard drives. These assets include a production plant and intellectual property rights linked to the business, it stated.

The concessions made by the HDD maker was to calm antitrust fears, following rival Seagate's decision to acquire Samsung's hard drive business for US$1.38 billion which brought the number of global manufacturers down from five to three, the report noted.

Western Digital had argued against having to make these concessions as it would put it at a disadvantage after Seagate's deal was cleared without conditions, but the EC decided to stand by its decision partly because Seagate lodged its merger notification before its rival, FT added.

The EU's competition commissioner Joaquin Almunia explained: "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."

In response, a Western Digital spokesperson told FT: "We are working to meet the remedy condition so that we may proceed to complete the acquisition as soon as possible."

Western Digital had earlier also lost another ruling to Seagate, after an arbitrator decided to award the latter US$525 million in payouts for alleged misappropriation of confidential information and trade secrets by Western Digital. The company will contest the decision though, with President and CEO John Coyne saying in the earlier report: "We believe the company acted properly at all times and we will vigorously challenge the award."